Wednesday, November 4, 2015


To borrow a quote from an Alan Jay Lerner lyric – “Damn! Damn! Damn! Damn!”.  Or, a more contemporary reference – “Oops! They did it again!” 

’Those who fail to learn from history are doomed to repeat it.’ - Winston Churchill

Sometimes it feels like the government does this best. Failed policies are often recycled – often many times – in some sort of desperate attempt to make them work. Or to spend taxpayer dollars to promote self-serving agendas. Sometimes it’s hard to tell the two apart.”

Kelly goes on to report –

The latest attempt to recycle failed policies is the outsourcing of tax debts to private collectors, an item which has re-appeared as part of the Highway Trust Fund Bill. Yes, you read that right. And no, the two really have nothing to do with each other. But this is, as you know, something that Congress loves to do.”

So, instead of giving the IRS proper funding for tax administration, the idiots in Congress would rather give a not unsubstantial piece of outstanding tax collected to an outside collection agency, verifying once again their status as idiots.

The government must not outsource tax collection to private agencies!  And not just because, as Kelly points out (highlights are mine) –

About 20 years ago, the IRS tried their hand at using private debt collectors. That lasted a year and was canned amid complaints about unfair practices and harassment. Congress made another go at private tax debt collectors during the George W. Bush administration as part of the American Jobs Creation Act. It didn’t end happily. That program ‘resulted in a number of complaints, including one case in which a private debt collector made 150 calls to the elderly parents of a taxpayer’ even after the collection agency discovered the taxpayer was no longer at the address.”

And -

The 1996-1997 program resulted in a $17 million net loss to the government. That second go in the mid-2000s? Another loss of $4.5 million. Those aren’t costs. They’re losses.”

Why should the government not outsource tax collection to private agencies?  

The Internal Revenue Service, and state tax agencies, have an ethical, and I believe legal, obligation to make sure that alleged outstanding debt is properly and correctly assessed.  They have a fiduciary responsibility to the Nation, or the State, and its taxpayers to be fair, equitable, and ethical in the administration of tax collection.  They must investigate taxpayer claims that debt, penalties and interest was assessed erroneously.

Outside collection agencies don’t give a rat’s arse about the legitimacy of an alleged outstanding tax debt.  They only make money if they collect money, whether the money is actually due or not.  And they will continue to unethically harass alleged tax delinquents, as they do when collecting alleged private debts, and as they been proven to have done in prior outsourcing programs. 

Kelly and I are not alone in my opposition to using outside collection agencies.

Linda Beale, a law professor who teaches tax courses at Wayne State University Law School and author of the blog A TAXING MATTER, pointed out quite correctly in October of 2007 that (highlight is mine) “If we would provide the IRS the resources and personnel to do the debt collection directly, we could collect more money with less taxpayer cost”, and posed the question - “If the White House is so concerned about the inequity of taxpayers avoiding their obligation to make payment on tax debts, why isn't it lobbying Congress for adequate funding of IRS enforcement needs?

National Taxpayer Advocate Nina Olsen has long opposed the use of outside collection agencies and criticized the program in place at the time in her January 2008 report to Congress, stating that (highlights are mine) “the program is falling far short of revenue projections. To date, the costs of the program have exceeded the revenue the program has generated, and the IRS cannot project when the program will break even”.

In 2014 she sent a letter to members of the Senate Finance Committee and House Ways and Means Committee outlining in detail her concerns with using private collection agencies.  Click here to read her letter.

IRS Oversight Board chairman Paul Cherecwich, Jr. also wrote to the leaders of the House Ways and Means Committee and the Senate Finance Committee, stating (highlight, again, is mine) “The concept has already failed twice”, said “When direct administrative costs are included, which the Joint Committee on Taxation failed to do, the program costs more to administer than the revenue retained. We concur with the NTA {National Taxpayer Advocate – rdf} in that outsourcing federal debt collection is a bad idea and it makes little sense to resurrect.’”

The 2014 proposal resulted in objections from consumer groups and civil rights organizations such as the NAACP, the National Council of La Raza, the Consumer Federation of America and the National Consumer Law Center. These groups cited ongoing problems with overaggressive private debt collectors used to rein in unpaid student loan debt. Click here to see the letter they sent to lawmakers at the time. 

Yesterday Ways and Means Oversight Subcommittee ranking Member John Lewis, ranking committee-member Sander Levin, and Budget Committee ranking member Chris Van Hollen issued a statement expressing objections to the use of private collection agencies.  Click here to see their statement.

My advice to taxpayers back in 2007 was – “If you receive an IRS Letter 3998-C stating that your account has been referred to an outside agency, write to the IRS and tell them that you refuse to deal with a private collection agency and will only deal directly with the IRS because of your privacy concerns.”

And to taxpayers who received a letter from a collection agency stating that your account has been “outsourced” – “Write to the agency and tell them that you are not permitting them to proceed with your case and you would like them to return any and all information relating to you and your tax situation to the IRS. Send a copy of this letter to the IRS as well."  In other words tell the agency you refuse to deal with them and that you will only deal directly with the Internal Revenue Service.

The bottom line – to repeat, The government must not outsource tax collection to private agencies!  


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