For years, the general rule of thumb for avoiding an IRS phone scam was reassurance from the Internal Revenue Service itself that the agency would never contact taxpayers over the phone — whether to collect a tax debt or about anything else.
But that’s no longer the case.
The IRS is now using private debt collection agencies
Back in September of last year, the IRS announced it would begin using four different private collection firms to handle some overdue federal tax debts. Those companies are CBE Group, Conserve, Performant and Pioneer.
“As a condition of receiving a contract, these agencies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act,” the original announcement said.
According to the IRS, the decision to use private firms was based on several factors — one being a lack of resources to work on all of the cases the agency has to handle, including those involving older, overdue tax accounts.
Why this may get confusing for taxpayers
When an account or case is handed over to a private collection agency, the rules change — meaning it’s safe to assume that unlike at the IRS, people working for these private companies probably will call you.
And this is where it may become confusing for taxpayers — determining whether the caller is a real debt collector or a crook impersonating the IRS in an effort to steal your money.
It’s no secret that debt collectors have been known to use intimidating tactics and even resort to threats of arrest or constant harassment — which sounds a lot like the warning signs of a scam.
So if you get a phone call about a tax-related debt, how can you tell if it’s a scammer after your money and/or identity, or a legit collection attempt?
How the process works: Look for written notice in the mail
To help you protect yourself and better understand what to expect, the IRS provided the following information regarding how exactly this new process works (or is supposed to work):
- The IRS will give taxpayers and their representative written notice that the accounts are being transferred to the private collection agencies. The agencies will send a second, separate letter to the taxpayer and their representative confirming this transfer.
- Private collection agencies will be able to identify themselves as contractors of the IRS collecting taxes. Employees of these collection agencies must follow provisions of the Fair Debt Collection Practices Act and should be courteous and respect taxpayer rights.
- The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment.
- Private collection agencies will not ask for payment on a prepaid debit, iTunes or gift card. Taxpayers will be informed about electronic payment options for taxpayers on this IRS page. Payment by check should be payable to the U.S. Treasury and sent directly to IRS, not the private collection agency.
The IRS also says that the agency will not assign accounts to private collection firms involving taxpayers who are:
- Under the age of 18
- In designated combat zones
- Victims of tax-related identity theft
- Currently under examination, litigation, criminal investigation or levy
- Subject to pending or active offers in compromise
- Subject to an installment agreement
- Subject to a right of appeal
- Classified as innocent spouse cases
- In presidentially declared disaster areas and requesting relief from collection
You can see more details about the agency’s use of private firms on the IRS website.
How to protect yourself against a potential scam
According to the IRS:
Even with private debt collection, you shouldn’t receive unexpected phone calls from the IRS demanding payment. When people owe tax, the IRS always sends several collection notices through the mail before making phone calls.
IRS scams typically involve impostors calling people and demanding immediate payment. In some cases, they may impersonate local law enforcement and threaten people with immediate arrest unless they send untraceable money amounting in the “thousands of dollars for back taxes” that you supposedly owe.
One way scammers convince people to pay up is by using phone spoofing, which makes the number they call from show up as “IRS” on the caller ID. And if the scammer already has the last four digits of the person’s Social Security number — it makes them sound pretty legit.
Here are some of the tactics used by these scammers:
- They use common names and fake IRS badge numbers.
- They send bogus IRS e-mails to support their scam.
- They call a second time claiming to be the police or department of motor vehicles, and the caller ID again supports their claim.
- You’re told to submit payment by wire, prepaid card or some type of gift card.