Tim’s Tax News on the Tenth – January 2020

MIXED REVIEWS ON IRS PRIVATE DEBT COLLECTION PROGRAM

The federal government’s relatively recent program outsourcing the collection of longstanding tax debt to private companies received mixed reviews for its results in 2019. The outsourcing program’s 2019 results almost tripled those of 2018, though it fell short of the revenues lawmakers had anticipated for the program.

The IRS private debt collection program brought in $212 million from taxpayers in fiscal 2019, up from $82 million in the prior year. The four companies participating in the program took commissions of $39 million, leaving—after other administrative costs—$148 million in net revenue to the IRS. That result is up from the $51 million recognized by the IRS in 2018.

Under the 2015 law that authorized the use of private debt collectors, one-quarter of the program’s revenue goes directly into a fund for hiring IRS tax collectors. The IRS said it has hired 100 new employees using those funds so far and plans to hire 100 more next year.

The IRS private debt collection program’s 2019 revenues fell far short of projections made by the Congressional Budget Office (“CBO”) in 2015 prior to the law’s passage. CBO estimated the private collection program would bring in $492 million in 2019, more than double the actual revenue recognized in fiscal 2019.

The National Taxpayer Advocate has frequently criticized the recent program since it was relaunched in 2017, saying it is disproportionately targeting taxpayers who "cannot afford to pay for their basic living expenses.” The National Taxpayer Advocate also said the program is “simply substituting for the IRS inventory queue,” leading to private companies taking commissions without adding value.

The IRS has responded to the National Taxpayer Advocate’s critic saying that the IRS after nearly a decade of budget and staffing cuts can no longer carry out fully the collection needed to be performed. Therefore, the IRS private debt collection program was enacted to help the IRS carry out its mission. The private tax collectors do not target vulnerable taxpayers and they work with tax delinquent individuals to set up payment plans based on what the taxpayer can afford.

Despite the IRS and legislator’s applauding the program there have been other critics of the program besides the National Taxpayer Advocate that includes the Treasury Inspector General for Tax Administration and the National Treasury Employees Union each giving other reasons for eliminating the program.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 28 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

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