On December
4, 2015 the President signed into law a five- year $305 billion highway bill.
One of the
contentious issues was the 18.4 cents per gallon gasoline tax. You know the
politics: one side wanted to increase it and the other did not. Unable to come to agreement, Congress looked
elsewhere for the money.
One place they
looked was the use of private debt collectors for IRS debt.
Ohio
routinely farms out its tax collection to private agencies. Does it work? Well,
let me answer the question this way: I usually request the file be returned to the
Ohio Department of Taxation. Why? Because the collection agency could not care
less whether the debt is accurate or not, whether the penalties are correctly
calculated, or whether there is even a tax case to be collected. I have, for
example, seen Ohio farm out collection on cases where the appeal period was
still open. Although Ohio is not especially friendly to work with, they are better
than dealing with a debt collector. You would be pressed to find too many Ohio tax
CPAs that have positive opinions about this arrangement.
Congress has
gone down this path before. The most recent collection program started in 2006
and ended in 2009. The program was widely considered a failure, as was its
predecessor in 1996-1997. After accounting for commissions paid as well as
internal IRS costs to administer, both programs actually caused losses
for the Treasury.
The National
Taxpayer Advocate, Nina Olsen, expressed her feelings clearly to Congress:
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
wound up losing money. We have no reason to believe the result would be any
different this time.”
The Federal
Trade Commission routinely reports more complaints about debt collectors than
any other industry. FTC chairwoman Edith Ramirez stated that over 280,000
federal complaints were filed in 2014 alone.
You know
that Congress would not care.
Section 6306
of the highway bill requires the IRS to enter into collection contracts for the
collection of certain inactive tax receivables, defined as:
·
A
receivable removed from active inventory for lack of resources or because the
taxpayer cannot be located;
·
A receivable where at least one-half of the
statute of limitations period has expired and no IRS employee has been assigned;
or
·
A
receivable assigned for collection but at least one year has passed since
taxpayer contact
Did you
catch the use of the word “requires?” That is quite the departure from
pre-existing law, which “authorizes” the IRS to use private debt collection
agencies.
There are
some exceptions, such as:
·
Pending
or active offers in compromise or installment agreements
·
Innocent
spouse
·
Deceased
taxpayers
·
Minors
·
Taxpayers
in designated combat zones
·
Taxpayers
in examination or appeal
·
Victims
of identity theft
The last one
is disconcerting, especially after the Treasury Inspector General for Tax
Administration reported in 2014 that it received over 90,000 complaints about
scam telephone calls demanding payment from impostors claiming to be the IRS. IRS Commissioner Koskinen cited the TIGTA report
and reminded taxpayers that:
Taxpayers should remember their first contact with the IRS
will not be a call from out of the blue, but through official correspondence
sent through the mail.”
Well, that used
to be true.
