No one likes bill collectors, but now Uncle Sam will start using them to collect taxes.
And that could play right into the hands of crooks, who already have been very successful in cheating taxpayers out of their money.
Congress, in a law that took effect this month, instructed the Internal Revenue Service (IRS), against its objections, to use private collection agencies for “outstanding inactive tax receivables.” Before the legislation passed, the IRS Taxpayer Advocate Service pointed to a number of problems with this approach, including that it loses money and had failed twice before – a characterization that congressional proponents reject.
But since those attempts, there has been a growing menace that makes the use of bill collectors even more problematic. Generally, the IRS does not contact taxpayers by phone. But legitimate bill collectors and tax scammers do. Once the private collection program begins, which Congress says should be early next year, it will be even more difficult to distinguish between the real and fake bill collectors.
“We are concerned about that,” IRS Commissioner John Koskinen said in an interview, while noting his efforts to comply with the law. “We are doing our best to make sure the existence of private tax collectors doesn’t complicate our public awareness campaign about how the scams work.”
A major part of that campaign is telling taxpayers “if you are surprised to be hearing from us, you’re probably not hearing from us because you won’t hear from us first by phone,” Koskinen said.
In July, he told a Senate hearing: “So now if you suddenly have private debt collectors calling up, saying they’re from the IRS, they’re going to run into the work that we and the inspector general and everybody else has had warning taxpayers.”
Nina Olson, the national taxpayer advocate, echoed that message on Friday. “There has been a huge spike in the number of scam callers seeking immediate ‘tax payments’ from unsuspecting taxpayers in the last couple of years. The IRS has responded by emphasizing it doesn’t make outbound calls of that kind. As this program stands up, there is a risk calls from private debt collectors will muddy that message,” she said. “There is also a risk scammers will study the dynamics of the private collection agency calls and try to mimic them to fool taxpayers. As the IRS develops the program’s procedures, it will have to take steps to minimize the risk of taxpayer confusion.”
Sen. Charles Grassley (R-Iowa), a supporter of private tax collectors, plays down that risk, noting that the private companies should mail taxpayers before calls are made. Although the law’s language does not require such letters, a statement from his office pointed to a congressional “joint explanatory statement” that says: “First, the private debt collection company contacts the taxpayer by letter.”
Will that be enough to remove any confusion between the legally mandated bill collectors and the scammers?
Calls by scam artists to unsuspecting taxpayers have become a booming business. The Treasury Inspector General for Tax Administration received 736,000 complaints in the two years ending in October. During that period, the inspector general’s office said, it “has become aware of approximately 4,550 victims who have collectively paid over $23 million as a result of the scam, in which criminals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they send them cash via prepaid debit cards.”
The scams are increasing, according to Inspector General J. Russell George, who has urged taxpayers to be on “high alert.” The October report showed significant growth from January, when his office reported 290,000 complaints and almost 3,000 victims losing a total of $14 million.
“There is no question that the ongoing telephone scam involving the IRS will prove challenging to the IRS and debt collectors working with it,” George said Friday. “Therefore, it is imperative that the IRS effectively educates taxpayers and debt collectors to ensure that the scammers don’t have another vehicle in which to engage in their illegal activity.”
When he issued the October warning, George said, “This scam has proven to be the largest of its kind that we have ever seen. The callers are aggressive, they are relentless, and they are ruthless. Once they have your attention, they will say anything to con you out of your hard-earned cash.”
Sounds like bill collectors.
Scammers claim taxes are overdue and must be satisfied with a prepaid debit card or with a wire transfer, according to the scam alert. Scammers have threatened tax debtors with arrest, deportation and even the loss of a driver’s license.
“If someone unexpectedly calls claiming to be from the IRS and uses threatening language if you do not pay immediately, that is a sign that it is not the IRS calling and your cue to hang up,” George said. “Again, do not engage with these callers. If they call you, hang up the telephone.”
But now, will taxpayers know whether the callers are legit or not?