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

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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.

Adam Levin, chair­man and co-founder of Credit.com and Cyber­Scout (for­mer­ly IDT911)

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.

More sto­ries relat­ed to the IRS and taxes:
Why the IRS should push Tax Day to June 15
Be on the look­out for these three tax scams
IRS needs to stop let­ting tax­pay­ers use stolen Social Secu­ri­ty numbers