After years of hearing that the IRS never calls taxpayers for unpaid tax debt, many people assume that a collection call for federal tax debt is a scam. In fact, the IRS uses 4 Private Debt Collection Agencies:
- CBE Group
These Third-Party Collection Agencies are governed by the Fair Debt Practices Act, and the same rules as other collection agencies. They should not call early or late at night or engage in intimidation or threats.
How to Know If a Collection Call Is a Scam
So how do you know if a debt collection call is a scam? The IRS should send you a Notice (CP 40) of Referral to a Third-Party Collection Agency. If you haven’t received CP 40, you can verify that the collection agency is one of the four agencies with whom the IRS is contracted. Remember that these collection agencies will never ask for payment—they will merely get an installment payment plan. All payments will continue to be made to the IRS.
Third-Party Collections Not Used for Certain Taxpayers
If you fit any of the following categories, the IRS should not refer your tax debt to a Third-Party Agency:
- You are under 18 or are in a Combat Zone in the military.
- You are in a federal disaster zone.
- You receive SSI or SSDI or earn less than 200% of the federal poverty level.
- You have an Installment Agreement to pay the debt in place, or you have made an Offer in Compromise to pay the debt.
What Can You Do If You Get a Collection Call
- Pay the pending tax debt.
- Call the Collection Agency and arrange to pay the tax debt in installments.
- Make an Offer in Compromise on your tax debt. Form 656 allows you to offer to settle tax debt for less than you owe.
- Give notice to the IRS on why you might be exempt from Third Party Collections (under 18, disaster zone, combat zone, SSI/SSDI, etc.).
Don’t hesitate to Get Assistance or Tax Help
If you receive a Third-Party Collection call, you may find that you need help in determining whether you owe taxes or assistance in negotiating a compromise or agreement as to the tax debt. The tax experts at Highland Tax Resolution can advise you and help you to get the best possible outcome for your tax debt issue.