UPC Business Solutions will bring you monthly updates concerning income tax legislation and any important money saving tips.

Ways and Means Votes to End IRS Private Debt Collection

The House Ways and Means Committee voted July 18 to repeal the private debt collection program used by the IRS to collect federal income taxes. The vote was 23-18, with all 17 Republicans on the committee (and one Democrat) voting against the bill, H.R. 3056, The Tax Collection Responsibility Act of 2007. The Administration had supported the private debt collection program as a means of reducing the $345 billion tax gap. Ways and Means Oversight Subcommittee ranking member Jim Ramstad (R-MN) took the position that without the program, the IRS would assign workers elsewhere and the tax debt would go uncollected.  Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) countered that the collection of taxes “is a core government function. It is the Internal Revenue Service’s mission.”  Lewis said the program wastes tax dollars by paying a bounty up to 24 percent to the private contractors hired to collect tax debt from delinquent individuals. “The private debt collection program is an insult to the American taxpayer and our federal tax system,” Lewis said. 

National Taxpayer Advocate Releases Report to Congress:  Improving Service, Private Debt Collection, OIC are Top Concerns

Nina Olsen, National Taxpayer Advocate, released her annual Report to Congress on July 19 and stated her three top concerns this year are the need to for IRS to improve taxpayer services, ensure that taxpayer rights are protected as IRS seeks to expand its private debt collection initiative, and making the office-in compromise program more accessible to taxpayers.

Olsen noted that her office is concerned that the pressure to reduce the tax gap may cause the IRS to emphasize collection at the expense of providing customer service.  She expressed the view that the IRS should also address the tax gap by improving services and making it easier for taxpayers to be voluntarily compliant.

Ironically, Olsen’s Report expressing misgivings about the private debt collection initiative was released the same day the House Ways and Means Committee voted to approve a bill to stop this IRS program (see the report above).  Olsen’s Report states her belief that the IRS can bring in more delinquent tax dollars at a lower cost to the government than the private sector.

One of Olsen’s major concerns with the offer-in compromise program is the requirement that taxpayers make a prepayment of part of the tax liability in question.  Her report revealed the results of a study of OIC submissions that revealed that more than seventy percent of taxpayers seeking to avail themselves of the program did not have access to the funds necessary to make the required payment.