State hires private collectors:
Like IRS, Arizona turns to outside companies to track down IOUs
Just like the federal IRS, Arizona is using private debt collectors to track down unpaid taxes. Eight collection companies now seek payments on overdue tax debts owed to the state.
When Israel Chapa received a letter in the mail from a private debt-collection company requesting that he pay an old Arizona tax debt, he thought it might be a scam. Con artists, after all, have been busy in recent years stealing refunds and conning people out of money in other ways, often by claiming to represent tax authorities.
But in this case, the letter turned out to be legitimate. Chapa checked his prior-year tax records and realized that he did owe Arizona around $80 from four years ago. He paid the debt, called the debt-collection firm back to check on his status and was told his account had been closed.
“It was very efficient,” said Chapa, an 84-year-old military retiree who lives in Phoenix. The tax debt was “something I should have caught earlier,” he said.
The collection firm, Account Control Technologies, was indeed working for the Arizona Department of Revenue in a newly expanded program. Eight collection companies now seek payments on overdue tax debts owed the state, said department spokesman Ed Greenberg. A more limited prior state program utilized three contractors.
The Internal Revenue Service this week raised awareness of private taxdebt collection efforts, announcing its own program whereby the federal tax agency will use four private-contractor firms. IRS officials said they expect the collectors will be contacting several thousand delinquent taxpayers a week by the time the program ramps up in full by summer. In all such cases, taxpayers already have been notified that they owe money to the federal government.
Other states including California, Florida, Indiana, North Carolina and Oklahoma have similar programs. California said it uses private contractors on debts that aren’t economical for its own collectors to pursue.
With the Arizona program, debt collectors that have met stringent department standards are authorized to approach taxpayers who have an outstanding tax debt of more than 40 days, Greenberg said in an email reply.
“Prior to being contacted by an approved private-collection agency, the taxpayer will be provided a series of notices advising the debt is owed,” he continued. “Once referred to one of the partnering agencies, a notice will be sent directly from the approved contractor to the taxpayer,” with the collecting firm identifying itself as a contractor for the Department of Revenue. Contractors must follow the federal Fair Debt Collection Practices Act and respect the rights of taxpayers, he added.
The newly expanded program, which began in February, adds efficiency to the department’s collection efforts, Greenberg said. “It replaces a 20-year-old procedure in which the account would have gone through a series of collection steps involving levies, liens and offsets against the taxpayer,” he said, adding that the new effort allows department collectors to focus their attention elsewhere.
Arizonans filed more than 3.3 million 2015 state tax returns, of which 4 percent eventually went to collection, Greenberg said. The past-due amount collected from individuals totaled $70 million, but that was only one-sixth the total including business collections and other sources.
One difference with the IRS’ new private-collection effort is that delinquent Arizonans can make their payments either to the collection firm or to the Department of Revenue. Past-due federal tax bills must be paid to the IRS, not one of the agency’s collecting contractors.
In addition to Account Control Technologies, Greenberg said the other collection firms in the Arizona program are Delta Management Associates, EOS CCA, Gila Corp., Harris & Harris, Linebarger Goggan Blair & Sampson, Progressive Financial and UCB.
More information on Arizona’s program can be gleaned at www.azdor.gov/ Collections/ContactCollections.aspx.