IRS CSEDs Are Sometimes Inaccurate

 

The Collection Statute Expiration Date (CSED) ends the Government’s right to pursue collection of a tax liability.  This date is generally 10 years from the date the tax was assessed.  However, some situations require the CSED to be recalculated.  In a 2013 audit by the Treasury Inspector General for Tax Administration (TIGTA), it was determined that the CSED was not always recalculated accurately.  An inaccurately calculated CSED could result in unlawful collection activity by the IRS and violate a taxpayer’s rights.  Conversely, the IRS could potentially lose revenue if an inaccurate CSED appears to have expired when the debt is still collectible.

Why TIGTA Did The Audit?

Over the years, the IRS has taken steps in an attempt to improve CSED accuracy. However, the National Taxpayer Advocate has reported miscalculated CSEDs as one of the most serious problems encountered by taxpayers. TIGTA’s audit was initiated to determine whether CSED recalculations were properly and accurately completed to effectively protect taxpayers’ rights and the Government’s interest.

What The Report Found.

TIGTA did a statistical sample of 75 tax modules from a population of 1,085 with manually recalculated CSEDs.  What they found was that 29 of the 75 tax modules, or roughly 40%, contained errors.  Their specific findings were:

  • Twenty-one had inaccurate CSEDs and eight were missing the required documentation to support the CSEDs.

  • Based on the results of their case review, it was estimated that CSEDs for 260 tax modules were extended longer than they should have been, 43 tax modules were not extended as long as they should have been, and 116 tax modules were unverifiable.

  • Most errors were made by employees.  Managerial approval is required when CSEDs are extended or updated for any reason.  However, the IRS internal controls requiring managerial approval were not always effective in ensuring the accuracy of manually recalculated CSEDs.

  • An IRS computer system recalculates most CSEDs systemically.  Random samples from eight separate activities that trigger systemic CSED recalculations showed that all CSEDs were accurate for six of the eight activities.  However, the CSED recalculations were not always accurate for modules involving bankruptcies or estates.

  • TIGTA also identified nine taxpayers who received an annual balance due reminder notice after the CSED expired.

What does this all mean?

If you have IRS debt that you believe has expired, but you are still receiving notices about it, then it could mean one of two things:

  1. Your CSED was inaccurately calculated
  2. There were actions taken on your account that stopped or “tolled” the CSED.

This post discusses what tolls the CSED and for how long.  If you are looking for how to calculate or recalculate your CSED, we recommend this post from our sister site.  It talks about how we offer a service, for a nominal price, where your CSED can be calculated so you know approximately when your CSED will expire.

IRS Using Private Debt Collection Agencies

Private Debt Collection
In December 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act). Section 32102 of the act requires the IRS to use private collection agencies (PCAs) for the collection of outstanding “inactive” tax receivables.  This post will talk about how the program works as well as answer some of the “concerns” people have voiced to us.

How the new program works
Typically, the accounts that are assigned to private collection are those where the unpaid tax obligations are not currently being worked by IRS collection employees and often were assessed by the tax agency several years ago. Taxpayers being assigned to a private firm would have had multiple contacts from the IRS in previous years and still have an unpaid tax bill.

First, the IRS will send you a Notice CP40 with  the name of the PCA, the PCA’s toll-free telephone number, and a ten-digit Taxpayer Authentication Number (TAN).   This mailing will include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency.

Only four private groups are participating in the program:

CBE Group
1309 Technology Pkwy
Cedar Falls, IA 50613

Conserve
200 CrossKeys Office park
Fairport, NY 14450

Performant
333 N Canyons Pkwy
Livermore, CA 94551

Pioneer
325 Daniel Zenker Dr
Horseheads, NY 14845

The taxpayer’s account will only be assigned to one of these agencies, never to all four.  Furthermore, no other private groups are being used or authorized to represent the IRS in these collection efforts.

Once the IRS letter is sent, the PCAs will send their own letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the collection firm’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.

How do I know if the company contacting me is a scam?
Before the PCA contacts you, they will send you a letter explaining that your tax debt has been assigned to it and listing the same TAN discussed above.  At the beginning of every phone contact, the PCA must ask you to provide the first five digits of the TAN and must respond by reading you the last five digits of the TAN. This allows the PCA to verify your identify and allows you to verify that that the caller works for the PCA. The PCA cannot continue the conversation with you until your identity has been verified.

“Here’s a simple rule to keep in mind. 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,” said IRS Commissioner John Koskinen. “The people included in the private collection program typically already know they have a tax issue. If you get a call from someone saying they’re from one of these groups and you’ve paid your taxes, that’s a sure sign of a scam.”

If taxpayers are unsure if they have an unpaid tax debt from a previous year – which is what the private collection firms will handle – they can go to IRS.gov and check their account balance via the View Your Tax Account service.  If the account balance says zero, that means nothing is due, and you typically wouldn’t be getting a contact from the IRS or the private firm.

Whether or not a taxpayer’s account is assigned to a private collection agency, the IRS warns taxpayers to beware of scammers pretending to be from the IRS or an IRS contractor. Here are some things the scammers often do but the IRS and its contractors will never do.

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes, and if a case is assigned to a PCA, both the IRS and the authorized collection agency will send the taxpayer a letter. Payment will always be to the United States Treasury.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

“Unexpected and threatening calls out of the blue from someone saying they’re representing the IRS to collect a tax debt is a warning sign people should watch out for,” Koskinen said.

What if I can’t find my Taxpayer Authentication Number?
You can request that the PCA re-send the letter with the TAN. Alternatively, if you agree, the PCA may verify your identity by using your Social Security Number instead of the TAN, as long as you first provide your full name, address, and date of birth. However, the use of your Social Security Number instead of the TAN does not allow you to verify that the caller works for the PCA, so you should consider carefully before agreeing to this.

What can (and can’t) a private collection agency do?
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers.  A PCA may not take collection action (such as file a lien, levy your bank account, or garnish your wages), nor may it issue a summons or report your IRS tax debt to the credit rating agencies.  But as with cases assigned to IRS employees, any tax payment must be made, either electronically or by check, to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, www.IRS.gov/Payments.

What if I want to explore other alternatives with the IRS?
You can call the IRS and explain that you do not want to pay in installments, or can’t afford to do so. If you orally advise the PCA you plan to contact IRS about collection alternatives, the PCA will place a 60-day hold on your account. If you have not reached an agreement with IRS within those 60 days, the PCA may resume collection activity on your account. Because many actions take longer than 60 days, you may wish to write to the PCA to request that it stop contacting you by sending them a No Contact Letter.

Do I have to work with the private collection agency?
No. You can send the PCA a written request to stop further communication with you (see No Contact Letter above).

What if I need to make a complaint about a PCA?
To make a complaint about a PCA or report misconduct by its employee, call the TIGTA hotline at 800-366-4484 or visit www.tigta.gov or write to:

Treasury Inspector General for Tax Administration
Post Office Box 589
Ben Franklin Station
Washington, DC 20044-0589