And since the IRS doesn’t have enough to do, the law requires the IRS (although the letter of the law says Secretary of the Treasury) to prepare two reports for the House Committee on Ways and Means and the Senate Committee on Finance: one is an annual report including, among other things, the total number and amount of tax receivables provided to each contractor together with the total amounts collected by and installment agreements resulting from the collection efforts together with collection costs incurred by the IRS. The second report is required biannually and will include an independent evaluation of each private debt collection performance and a measurement plan that includes a comparison of the best practices used by private debt collectors to those used by the IRS as well as how they identify and capture information.
Criticisms of the plan to outsource collections – which have been unsuccessful in the past – include the costs to the IRS to administer and oversee such outsourcing. The 1996-1997 pilot program resulted in a $17 million net loss to the government. A second effort in the mid-2000s resulted in a loss of $4.5 million. Those aren’t costs. They’re losses. In terms of costs, the government paid out $16 million in commissions to private collectors in the mid-2000s. An additional $86 million was paid out simply to administer the program – in other words, the cost of producing the result.
But, that result was a net loss.
There were also concerns raised in prior years about some of the tactics used by these private debt collectors. Year after year, the Federal Trade Commission received more complaints about debt collectors than any other industry. In 2013 alone, there were over 200,000 complaints filed with respect to collection practices (you can see a list of debt collectors banned from the industry here).
In addition, concerns about taxpayer privacy and fraud should not have been ignored.
In 2014, J. Russell George, the Inspector General for the Treasury Inspector General for Tax Administration (TIGTA), referred to a scheme where fraudsters called up taxpayers as
“the largest scam of its kind that we have ever seen.”
The TIGTA, IRS and Treasury have all warned taxpayers to be on guard against scammers, reminding them that “It’s worth noting that the IRS doesn’t generally initiate contact by phone.” But private debt collectors do.
I do believe that outsourcing collections will no doubt cause potential confusion for taxpayers and create new opportunities for scammers.
There are a number of reasons to be concerned about the consequences of outsourcing tax collections to private debt collections. When it was still in the early stages, the proposal was labeled “wrongheaded“, “the wrong approach,” “misguided,” and “a recipe for taxpayer abuse” (downloads as pdf). Nevertheless, Congress signed it into law, ordering IRS to “implement the proposal without delay.”
If you have issues with back taxes (or any other tax related problems) we can help you.
Just give SOLID TAX SOLUTIONS a call at (845) 344-1040.
Bruce – Your Host at The Tax Nook
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