Why tax collection scams are getting harder to stop
By turning over task of recouping tax debt to private firms, IRS boosts chances for fraud
By Adam Levin, Special to ThirdCertainty
I’ve written about tax-related crime for years, and have always offered this fail-safe rule to avoid tax scams: If you ever receive a call from the IRS about back taxes or any other money you supposedly owe the government, hang up because it’s a scam.
There was something comforting about that advice—maybe even a little satisfying. I mean, who secretly doesn’t want to hang up on the taxman? But it seemed no amount of repetition was enough to stem the tide of tax-related scams, and no matter how many times I wrote about that simple, satisfying tactic, the message never reached the people most vulnerable to such shenanigans.
Taxpayers still got taken in by scam artists dialing for dollars every day. It didn’t matter if the crook posed as an IRS employee, or if he ventured into the truly absurd with a claim that he worked for a collection agency that bought back tax debt from the agency. It was wacky stuff, the IRS selling debt. But it was wackier than that …
All you had to know was this: The IRS did all its own collecting, and it conducted all its business via snail mail. It never called. The advice was solid: Do or say whatever you want when the IRS called about back taxes or an audit because it wasn’t them!
You know where I’m going with this, right? Yep, leave it to our friends in Washington to take a bad situation and make it worse.
Four companies enlisted
Earlier this month, IRS chief John Koskinen announced that the IRS would be immediately outsourcing certain debt collection activities to one of four debt collection companies: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, New York; Performant of Livermore, California; and Pioneer of Horseheads, New York.
You read that right. The IRS is outsourcing to debt collection agencies.
When this initially was announced last September, I was convinced that it was a joke—and a pretty good one. Extra points for coming up with something more or less unthinkable— since truly, debt collection agencies could not be a more problematic solution to the IRS’s back tax problem—but it turns out it wasn’t their joke.
You can thank Congress for this epic face palm. Although it didn’t get much attention when it passed in 2015, one of the provisions of the Fixing America’s Surface Transportation Act required the IRS to hire private-sector debt collectors to pay for it.
Signs of a scam
Since consumers are going to have to handle this year’s post-tax season a little different as a result, here are some telltale giveaways that you’re getting scammed and should hang up:
1. You get a call from a collection agency not listed above. Only those four agencies are approved for these collections.
2. You do not owe back taxes.
3. The person calling you has asked you to send money somewhere other than the IRS. Even though the four collection agencies are making the call, the check goes to the Fed.
4. The caller asks you to pay in the form of gift cards, prepaid cards or asks you to wire funds.
5. The caller is aggressive or rude—a violation of your debt-collection rights.
6. You are asked for any information that can be used to conduct a financial transaction: Social Security number, bank account, credit or debit card number. (If you do turn over personal information, keep an eye on your credit for signs of identity theft. You can view your free credit report summary on Credit.com.)
7. If you are low-income, there may be other options for you. Contact the IRS to find out what they may be before discussing your debt with a collection agency.
By now we’ve gotten pretty good at surviving the ridiculous decisions made on Capitol Hill, but this latest one is a doozy. Happily, my old advice still stands. If you get a call from a debt collector, don’t engage until you verify the debt. If it was a legit collector, they’ll furnish written verification within five days of calling you, and here’s what to do when that happens.
Full disclosure: CyberScout sponsors ThirdCertainty. This story originated as an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
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Why the IRS should push Tax Day to June 15
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IRS needs to stop letting taxpayers use stolen Social Security numbers