Susan Tompor

Detroit Free Press Personal Finance Columnist

The Internal Revenue Service will soon turn to private debt collectors to address unpaid federal income taxes. But consumers, not surprisingly, are being warned that scam artists could ramp up calls demanding that you pay back taxes now.

The IRS will begin sending letters this week to a few hundred taxpayers who have had overdue bills for years to alert them that their accounts will be assigned to one of four private collection agencies. Some of the early cases will involve less than $50,000 owed. More letters will follow in the next few months.

This isn't the first time the IRS has tried to outsource some debt collection. So some remain skeptical on how this latest effort, a third attempt, might work out. Others are concerned that outside debt collectors could cost the government more money than they actually end up collecting from past due accounts.

The IRS last stopped using private debt collectors in 2009 after the agency had limited success with that three-year program and it was determined that government employees could better handle the job. Some studies argued that the private debt collectors actually had very little success after closing the easy cases where a taxpayer paid quickly after the debt collector's early phone calls.

The latest move has its critics, too, given the growth of fraudsters who cannot seem to stop impersonating the IRS already.

Nina E. Olson, the National Taxpayer Advocate and the taxpayer's voice at the IRS, also has raised concerns that taxpayers who are experiencing economic hardship could be hurt.

Olson noted in a report that under statutory and administrative rules, the IRS itself generally must refrain from seeking to collect money from taxpayers who are experiencing economic hardship.

Yet the new law does not explicitly require, or even allow, the IRS to withhold economic hardship cases from assignment to private collection agencies, Olson noted.

So the agencies, she said, could end up pursuing taxpayers in financial hardship for tax debts the IRS itself could not collect. By contrast, the IRS has authority to enter into offers in compromise that can be used by those facing hardships. An offer in compromise can be used by the IRS when the amount offered represents the most the IRS can expect to collect within a reasonable period of time.

The new private debt collection program was authorized by Congress in December 2015. The IRS will be gradually rolling out the program in April, but the private debt collection agencies are expected to reach out to thousands of more delinquent taxpayers each week later this spring and summer.

Taxpayers will always receive their first contact from the IRS, not a debt collection agency. The IRS will mail a letter to the taxpayer and include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

Only four collection agencies are participating in the program: CBE Group of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant of Livermore, Calif., and Pioneer of Horseheads, N.Y.

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Taxpayers would only be assigned to one of these agencies.

IRS Commissioner John Koskinen said in a statement Tuesday that taxpayers should be on the lookout for scammers who might try to trick people. In the past, scammers have tried to swindle consumers by making phone calls and requesting payment on iTunes cards, gift cards or other prepaid cards.

"In reality, those taxpayers whose accounts are assigned as part of the private collection effort know they have a tax debt," Koskinen said.

If you're getting a call and you've paid your taxes, he said, you know it's a scam.

"You won't get a call from a private collection firm unless you have unpaid tax debts going back several years and you've already heard from the IRS multiple times," Koskinen said in a statement.

Once an IRS letter is sent to alert consumers that a collection agency will call, the private firm will send a letter to the taxpayers and confirm that the account will be transferred to an outside firm.

The private collectors will be allowed to identify themselves as contractors of the IRS. Collectors must be courteous and respect taxpayers' rights.

Any checks to make payment on a federal income tax debt would be made out to the U.S. Treasury. Payments are still sent to the IRS, not an outside collection firm.

See www.irs.gov/payments for information on payment plans and options.

Taxpayers who are unsure whether they have an unpaid tax debt from a previous year can go to IRS.gov. See www.irs.gov/balancedue.

If the account balance says zero, that means nothing is due.

Taxpayers who will be contacted by outside collection firms will receive a publication to alert them to their rights. Complaints about debt collection practices can be made to the Treasury Inspector General for Tax Administration.

See www.treasury.gov/tigta. Or call TIGTA at 800-366-4484. Consumers can file complaints about tax-related scams to TIGTA, as well.

Contact Susan Tompor: stompor@freepress.com or 313-222-8876. Follow her on Twitter @Tompor.