No one wants to receive a call out of the blue from the IRS, but perhaps an even worse call is one that comes from a liability collector. Liability collectors have a terrible reputation and in most cases, it’s a reputation that they have rightfully earned. Now just imagine getting a call from a liability collector that is working for the IRS. That’s a double whammy that sounds about as fun as getting in the ring with a world champion MMA fighter, with no way out. Unfortunately, that kind of phone call could be coming soon to homes around the country. That’s because last year Congress decided again to allow the IRS to outsource its collection efforts to private liability collectors.
This isn’t the first time that the IRS has been allowed to use private firms, but neither of the other two times went well, and the nation’s top tax agency even expressed concerns to Congress about taking such measures. The government argues that the overdue bills consist of money that is actually owed and not in dispute, so therefore the use of private liability collectors makes sense. However, not everyone agrees with that assessment. The idea has plenty of critics. Some believe that tax collection is a government job and therefore only government employees should do it. Others are concerned with the security and privacy risks that could be involved. Some opponents feel that by using private collection firms it could be easier for scammers to steal taxpayers’ money as well as their identities.
The law also allows these private collection agencies to use automatic-calling devices, or so-called robo-callers, to contact taxpayers without receiving permission before they call. No one enjoys those annoying automatic calls from any source, much less from a liability collection agency. Of course, one of the most popular tactics that collection agencies employ is to threaten those who are in liability. This is also a common strategy used by scammers, which could only confuse taxpayers even more. Threatening calls can spook someone into complaining but what if a taxpayer confuses a scammer for a real collection agency? The possibilities are endless.
Another concern about using private companies is the cost. While it’s true that private collection agencies might be able to help recoup more money for the IRS, quicker, the fact is the IRS will pay a heavy price tag for that service. In fact, according to IRS officials, when they used this same strategy for four years between 2006 and 2009 the government actually ended up paying more money to the collection agencies than the agencies collected. The IRS reportedly ended up down $4 million after paying all the necessary fees to the agencies. What’s more, during those same years, the Taxpayer Advocate Service of the IRS determined that IRS agents were much more effective at collecting taxes owed than private agency collectors. According to the numbers, private agencies collected about half the amount the IRS agents collected over the same time period.
It remains to be seen to what degree the IRS will use private collection agencies this coming year, but if you owe the IRS any money then your best bet is to get it paid off as quickly as possible or enter into a separate agreement with the IRS so you don’t have to worry about being contacted by a liability collection agency. After all, that’s a phone call no one wants to get.
This post was published on February 8, 2016