There is a move underway to allow the IRS to use private collection companies to collect back income taxes from delinquent taxpayers.
People on both sides of the issue say they believe IRS workers can collect unpaid taxes more cheaply and effectively than contract collectors. But because of chronic staff shortages and other resource constraints, IRS workers often are unable to follow up until years later.
The use of private collectors has been debated for many years. In 1996, the General Accounting Office (now the Government Accountability Office) suggested that "there may be a role for private debt collectors in collecting federal tax debt."
In 1996 and 1997, Congress directed the IRS to test the idea, but the experiment was called off early after it turned out that the program was costing more than it was bringing in.
Some fear that private collectors, who work on a percentage of the amount collected, will be too aggressive. We have all heard horror stories about people receiving harassing calls at all hours both at home and at the workplace.
There are also some horror stories about the tactics used by IRS collectors. During much of the 1980’s and 1990’s I personally prepared over 4,500 Federal Income Tax Returns. During that time, I became aware of some of the aggressive collecting methods used by the IRS.
If the IRS decided that a taxpayer would not respond to any other approach, they would send out collectors who used whatever means they felt necessary to make an example of the non-paying taxpayer. They have been known to take almost anything of value belonging to the taxayer.
In one case that made the news in the 1980’s, the IRS took a piggy bank full of small coins. Later it was found that the bank belonged to a grandchild of the taxpayer and was returned to the child. However, the publicity was good for the IRS because it would get the attention of other delinquent taxpayers.
It was my considered opinion that the IRS enjoyed the negative publicity generated by cases like the child’s piggy bank. I think they felt it would frighten others into paying taxes in a timely manner.
So what is worse - attaching a child’s piggy bank or harassing phone calls at all hours? Also, why are private collection companies being considered now after the study in the mid-1990’s showed the use of outside collectors was not cost effective?
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