On October 8, 2019, the Internal Revenue Service (IRS) announced that private debt collectors can now accept direct debits from taxpayers. If a collection agency is handling your tax debt, this means that you can provide your banking details and let the agency take one or more payments directly from your checking or savings account. Before setting up a payment, check out these essentials, so you know what to expect and to avoid falling prey to a scam artist.
Which Collection Agencies Can Accept Direct Debits?
At the time of writing, the IRS only works with four collection agencies: CBE, Performant, Pioneer, and ConServe. If a bill collector from any other agency calls you about a tax debt, do not provide them with any personal details or banking information. Instead, contact the IRS or a tax professional directly to figure out what’s happening.
These four collection agencies do call taxpayers, but the phone call should not be your first contact. Before any phone calls, the IRS and the collection agency should have both sent you a letter. The letters should include your Taxpayer Authentication Number (TAN) — make sure the agency can verify this number with you before you provide them with any details.
How Do You Set Up Direct Debits to Pay Tax Debt?
Normally when you set up a direct debit with a collection agency, you provide your routing and account number over the phone and give verbal authorization for the withdrawal. In this situation, however, you need to provide written authorization. If the collection agency tries to take a check over the phone, they are not following the correct protocol, and they may even be a scammer.
The collection agency should send you a written authorization which you fill out and return by fax or through the mail. The paperwork includes your banking details, the amount of the payment(s), and the scheduled payment date(s). After receiving the authorization, the collection agency drafts a check from your account, makes out the check to the U.S. Department of Treasury and sends the check to the IRS within 24 hours. Then, the funds leave your account on the day you authorized — note that the transaction may take longer to show up based on your bank’s processing times.
What If You Need to Make a Change to the Direct Debit?
If you want to cancel or reschedule a payment, you need to call the collection agency at least one business day before your scheduled payment. For instance, if you schedule your payment for Monday, you need to call by Friday. If you schedule your payment for a Tuesday and Monday is a holiday, you also need to call by Friday.
To make extra payments, contact the collection agency or set up an electronic payment on the IRS website. You can also mail a check made out to the U.S. Treasury directly to the IRS.
What About the Risk of Scammers?
Unfortunately, many scammers call people, pretending to be the IRS. The scam artist may try to convince you to make a check or credit card payment over the phone and then steal the funds. Alternatively, the scammer may try to get personal information such as Social Security Numbers or banking details that they can use to steal your identity, take over your accounts, or open accounts in your name.
If you receive a phone call from someone claiming to represent the IRS, here are some signs the call may be a scam:
- The caller is not from one of the above-listed collection agencies.
- You have not received a letter yet.
- The caller does not inform you that the call is an attempt to collect a debt — this is a requirement under the Fair Debt Collection Practices Act (FDCPA), which all the IRS’s contracted collection agencies follow.
- The caller breaks other FDCPA rules such as calling too early in the morning or too late at night, calling excessively, or threatening you with legal action.
- You have a letter, but the caller can’t verify your TAN or the amount you owe.
Trust your instincts. If something feels wrong, don’t give out your information. If you believe a scam artist has contacted you, contact the Treasury Inspector General for Tax Administration at 800-366-4484 or make a report online.
When Did the IRS Start Working With Private Debt Collectors?
The IRS began contracting with private debt collection agencies in April 2017 for individual taxpayer debt, and on June 2019, the agency also began placing some business tax debts with collection agencies. To date, the IRS has assigned 1.9 million cases and about $16.2 billion in tax debt to these collectors, and over 163,000 taxpayers have either paid their balances in full or set up payment plans with these agencies.
If you have tax debt, our tax debt specialists can help you eliminate fees, lower interest, set up payments, or potentially even reduce your entire tax debt. To learn more, contact us today.