The Internal Revenue Service (IRS) has announced that a new payment option has been added to the private debt collection program. The payment option is intended to make it easier for those who owe to pay their tax debts, although some practitioners, like me, fear that it could lead to abuse.
Taxpayers can now choose a preauthorized direct debit to make payments toward their federal tax debt. With direct debit, the taxpayer will give their written permission to the private collection agency (PCA) to authorize payment on the taxpayer’s behalf to the Department of the Treasury. This means that taxpayers can schedule payments with the PCA.
This option is being touted as a convenience for taxpayers and will supplement existing IRS payment options. Those other options still exist. You can find electronic payment options through IRS at IRS.gov/Paying Your Taxes. You can also pay by check: Checks should be made payable to the U.S. Treasury and sent directly to the IRS, not the PCA.
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The option to pay through the PCA is brand-new and reflects a shift in collection efforts. In 2017, Congress forced the IRS to hand over some collections to PCAs. The law was pushed through despite the failures of past privatization efforts and despite concerns about what privatization efforts might mean for taxpayers (including those expressed by the Treasury Inspector General for Tax Administration and former National Taxpayer Advocate Nina Olson).
One of the companies handling private collections is Pioneer Credit Recovery. In 2017, a group of senators sent a letter to Pioneer, explaining that they were particularly concerned about “Pioneer’s contract because of the abuse of federal student loan borrowers by its parent company, Navient, through its Education Department student loan servicing contracts.”
(Earlier this year, Forbes reported that Navient ranked highest in terms of student loan complaints. You can read more here. For more on one of several lawsuits that claim that Navient engaged in improper behavior related to student loan borrowers, allegations the company calls false, click here.)
The senators obtained the call scripts used by Pioneer and other PCAs. The Senators found all of the scripts to be concerning, but those used by Pioneer were “particularly troubling.” For example, part of the collection process should involve telling taxpayers that they have the right to obtain assistance from the Taxpayer Advocate Service (TAS). The Senators found, however, “there is no evidence in the Pioneer call scripts . . . that the collector intends to provide this information to taxpayers.” At least one PCA, Performant, did have scripts that included instructions on how a taxpayer may contact the TAS.
Pioneer’s call scripts also allegedly made an implied threat that the debt collector would have the means to seize payment involuntarily; that may be a violation of the Fair Debt Collection Practices Act (FDCPA) and other laws. Additionally…