IRS Selects Private Debt Collection Companies for New Federal Tax Debt Program

The IRS will work with private debt collection companies to collect “inactive tax receivables” starting in spring 2017.

The IRS announced Monday the four private debt collection companies it has chosen to contract with as part of a new program for collecting overdue federal tax debt: The CBE Group, Inc., ConServe, Performant Recovery Inc., and Pioneer.

The private tax collection program is in place as part of the Fixing America’s Surface Transportation (FAST) Act – a five-year highway funding bill – signed by President Barack Obama in December 2015, ACA International previously reported. The FAST Act includes a provision requiring the IRS to use private debt collection agencies to recover unpaid tax debt.

Starting in spring 2017, the companies in the program will collect money on accounts the IRS is no longer actively working on, according to a news release from the IRS. Under the new law, the IRS must use private collection agencies to collect “inactive tax receivables.”

“Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases,” according to the news release.

The IRS will send taxpayers a written notice that their account is being transferred to one of the companies contracted through the program, and the companies will follow up with a second written notice to confirm the transfer.

Accounts that will not apply to the program include those for consumers who are under the age of 18, victims of tax-related identity theft or servicemembers serving in designated combat zones, according to the IRS.

As an added measure of accountability, the law stipulates the IRS must present two reports to Congress detailing the effectiveness of the program, ACA previously reported. One report would focus on the total amount of tax receivables outsourced to private collection agencies, the total amounts collected by these agencies and the subsequent costs incurred by the IRS. The second report is an independent performance evaluation of the agencies contracted with the IRS; it will include a comparison of best practices between the IRS and private collection agencies.

When the IRS last worked with private collection agencies to collect consumer tax debt in 2006, an independent study found that collection agencies had a customer satisfaction rating of 96 percent – higher than the IRS’ rating.

Private collection agencies already put $55.2 billion dollars in revenue back into the U.S. economy, according to an Ernst & Young study on the Impact of Third-Party Debt Collection on the U.S. National and State Economies in 2013. Recovery of consumer debt by third-party debt collectors on behalf of America’s public, private and nonprofit sectors keeps the credit-based economy afloat and has significant positive effects on our nation’s overall economic health.

By ACA International