Legal Aid Society of Northeastern New York

Articles

Are you being contacted for tax debts? What you should know.

Wednesday, January 23, 2019

People all over the country are being contacted about Federal and State tax debts, either by phone, mail, or in person visits, while others may be contacted through email, social media, text, or other means.

 

Are tax collectors simply becoming more aggressive. The answer is no. While the IRS is responsible for processing, examining, and collecting on tax debts, their operating budget has been drastically decreased and they have limited resources to collect on unpaid tax debts. While some states may have become more aggressive, such as NYS Civil Enforcement, the increase in collection efforts stems from private individuals and companies who profit from collecting tax balances. These private entities generally fall into one of three categories; 1) Private debt collectors contracted by Federal and State taxing authorities, 2) for profit tax resolution companies, and 3) scammers. Regardless of who is contacting you, it is important to know who is contacting you and your options for dealing with such entities.

 

The IRS has been required to transfer unpaid tax accounts that meet certain criteria to Private Debt Collection Agencies. Currently, the IRS has contracted with four Private Debt Collection Agencies, CBE, ConServe, Perfomant, and Pioneer. If you are contacted by a Private Debt Collection Agency, you have the right to request that your tax account be returned to the IRS. As long as the request is made in writing, the Collection Agency should return your account to the IRS. Some states also contract with Private Debt Collection Agencies. You should always verify the address and phone number of these companies and not rely on the address and phone number that appears on a letter or given during a phone call as a scammer could be contacting you.

 

Having your Federal or State income tax debts assigned to a Private Debt Collection agency may not in your best interest. The most glaring example includes individuals who have been assigned to private debt collection agencies after having established with the IRS that any payment towards their Federal income tax debts would create an undue economic hardship and who have had their accounts placed in Currently not Collectable (CNC) status. While these individual’s accounts are in CNC status, the IRS, itself, will not attempt to collect on the outstanding debt, although they will apply any available refund towards the debt. However, once the account is transferred, Private debt collectors will attempt to collect the debt.

 

In order to reduce the amount of scams resulting from the involvement of private debt collection agencies, the IRS mails a notice informing of the transfer. Unfortunate, the notice is generally mailed to the address on the last filed income tax return. If a person has not filed an income tax return since they have moved to their current address, they will not receive this notice.

 

The IRS and State Taxing Authorities will file Tax Liens and Warrants once a debt has met certain criteria. A lien or warrant is a public document that informs the public that a person has debts and it preserves the IRS’ and State Taxing Authorities interest in the debtor’s property. Since this information is a matter of public record, some private entities have used this information to create mass mailing advertising campaigns to sell tax resolution services. These for profit tax resolution services should provide a company name and contact information. However, some of the advertising currently being used by these private firms are made to appear as though they are mailed from the IRS or other State taxing authorities. If you receive such an advertisement, you should verify the company that is soliciting your business. Unfortunately, there are no good methods of stopping unwanted mail.

 

If you are contacted, directly, by a for profit tax resolution agency, it may be an indication that you have an tax debt that you are not aware of. The IRS and many State tax authorities can make changes to your income tax accounts on returns that were filed 3, 6, or more years ago, as well as calculate tax debts when a tax return was not filed.

 

When the IRS or State Taxing Authority proposes to make changes to a person’s tax account, they mail notices to the address on the last filed return. The IRS and State taxing authorities have information reported to it by many organizations, including banks, brokerages, financial services companies, and employers. If a tax return was not filed and income information was reported, whether or not the information is accurate, a tax could be calculated from this information and a notice would be mailed to the address on the last return filed. If the person has moved and not update their address, they will not respond and the tax can be changed.

 

Lastly, using people’s fear of Federal and State taxing agencies, scammers have been using, what we can only imagine is the phone book, as a method of stealing money from unsuspecting victims. Scammers, use any form of communication available including phone calls, mailings, electronic mail, and social media. While the IRS, State tax authorities, and private debt collectors may call, mail, or even visit, they will not contact you through email and social media. Additionally, scammers often pressure immediate payment with unusual payment methods, such as gift cards or wire transfers. If you receive a call from anyone claiming to be from the IRS, State Tax Authority, or a Private debt Collector, you should always terminate the call and contact the agency directly after verifying the correct phone number.

 

While the IRS, State Taxing Authority, or private debt collection agency should never threaten you with arrest or other serious repercussions from not paying your tax balance immediately, the IRS and some State Taxing Authorities can threaten suspension of passports, driver licenses, bank account levies, wage
garnishments, or other property seizures, they will generally send a notice informing you of such impending action and will give you the right to a hearing.

 

Whenever you or anyone you know is contacted by someone about unpaid taxes, you should always; contact the agency directly through a phone number or address located on their own website, identify the type of organization that is contacting you, and independently research your options.

 

Whether you actually have unpaid income taxes or there is a mistake on your accounts, you can contact a Low Income Taxpayer Clinic in your area to discuss your case.