Here’s a simple question – how do you feel about the IRS farming out collection of delinquent federal tax debts to private collection agencies?
For those who don’t keep track of what tax law Congress is fiddling with on any given day, this latest controversy is a part of the tax extenders bill.
Officially known as the EXPIRE Act (S.2260), it was voted down by the full Senate after being passed by the Senate Finance Committee. It’s now cooling its heels in the Senate, hoping to get another vote after negotiations which may extend into the next year.
As if there isn’t enough controversy and heat being generated by the renewal and extension of the boatload of expired tax credits and deductions that are the core components of this bill, Senators managed to add more fuel on the fire by sneaking in more measures.
One measure related to private collection agencies is drawing heavy fire from tax professionals and the media. The proposal included in the bill, if enacted into law, would allow the IRS to outsource collection of delinquent federal tax debts to private collection agencies (PCAs).
The best you can say about this idea is that Congress thinks it’s a good way to increase revenues quickly without raising taxes. Apart from that, it’s a terrible idea with extreme ramifications for taxpayers.
For starters, it’s not going to work because whatever else you think about the IRS, it’s a fact that the agency is highly effective at making people pay their taxes voluntarily. There’s no way a private tax collector will strike more fear into the hearts of delinquent taxpayers and make them pay when the IRS can’t do so.
Secondly, handing cases over to PCAs will remove any last vestiges of relief possible for those suffering from financial hardship and genuinely unable to pay their taxes.
All said and done, it’s a well-intentioned proposal that will do no good, but is likely to cause a lot of harm.
This is not just conjecture or opinion, but established fact based on the performance of the private debt collection (PDC) program administered by the IRS from 2006-2009.
Here’s what National Taxpayer Advocate Nina Olsen, who was personally involved with the development of the PDC program and handled more than 3,700 cases of tax debts which PCAs were trying to collect.
Olsen says in a letter to Senators who asked for her opinion that “Based on what I saw, I concluded the program undermined effective tax administration, jeopardized taxpayer rights protections, and did not accomplish its intended objective of raising revenue. Indeed, despite projections by the Treasury Department and the Joint Committee on Taxation that the program would raise more than $1 billion in revenue, the program ended up losing money.”
Well, that seems clear enough for ordinary mortals, but apparently not for certain Senators who are sticking to their guns and refuse to strike out the measure from the EXPIRE Act.
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