ANOTHER TAX PROFESSIONAL DISCUSSION: OUTSIDE COLLECTION AGENCIES

 

As reported by CCH –

“On December 3, 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST) (HR 22). The vote in the House was 359 to 65, and the vote in the Senate was 83 to 16. House Speaker Paul Ryan, R-Wis., noted that the bill was the first long-term transportation legislation in a decade. The President is expected to sign {has signed - rdf} the legislation.”

An earlier CCH item told us (highlight is mine) –

“The Fixing America’s Surface Transportation (FAST) Act, as agreed to in Conference, directs the IRS to contract with private collection agencies for the collection of inactive tax receivables. These include cases that have been removed from active inventory because of lack of resources or inability to locate the taxpayer. Certain cases, however, would not be worked by private collection agencies, such as cases where the taxpayer has a pending or active installment agreement, innocent spouse cases and victims of identity theft.”

I recently posted the following poll at local and national tax professional Spacebook groups –

“Should the IRS, or NJDOT, use outside collection agencies to collect delinquent tax debt?”

Not a single respondent felt that having the IRS, or any tax agency, outsource collections was a good idea.  I am not aware of any tax professional, or government tax agency employee or representative, who supports this idea.  Since the members of Congress are idiots (the picture above obviously refers to the idiots in Congress, and not to the Tax Professionals of the post title) I guess that explains why they included it as part of the Highway Bill.

What follows are some of the responses I received.  The first one sums up the correct answer very nicely.  Many respondents felt, as I do, that if the IRS, or state tax agency, was properly funded it could more appropriately and effectively perform all collection duties.

ü “The utilization of an outside collection agency is a very bad idea.”

ü “Just yesterday I had a bad experience with that........client is STILL being hassled by an outside collection agency that is used by the Division of Taxation for a return that was settled through an amendment in October.”

ü “With all the phone scams going on now, what makes anyone think we should tell our clients to pay any attention to someone ‘claiming’ to be from a collection agency?!?!”

ü "Believe it or not, a lot of the public will still respond to a threatening voice on the phone with money. The ability of the government to hire an outside agency will just open the flood gates of fraud.”

ü “No. Privacy issues abound”.

ü “If the IRS collection scams aren't enough, this will only perpetuate that problem.  If Congress would approve funding to start with, maybe more people would be compliant.  Budget approval should be first and foremost in Congress right now, and it's time to impose term limits and clean house.”

ü “Most of the third party collections cases I encountered with debt owed to the State of New Jersey were ultimately brought back to the State and resolved by the State in a manner that was fair to the taxpayer and the citizens of New Jersey. The third party collection agencies minimized the humanity of the taxpayer.”

ü “Absolutely NOT. We went through this a few years back and it was a disaster. How about Congress just fully fund the IRS. When they are fully funded, they collect their money.”

ü “The State of Louisiana did this a couple of years ago.  Unmitigated disaster.  The collections agencies, typically, broke all the fair credit rules, the State would no longer help a client with the case, it had to be pulled back from the third party, cases in IA got mixed up in the collection agencies stuff, people started getting harassed even though they were current in their payments, and I could go on.  It lasted about 18 months then the State canned it.”

ü “No. Unless the collection company employees are governed by the same privacy and confidentiality rules and subject to the same sanctions as Enrolled Agents, CPAs, and attorneys, taxpayers' rights will be violated. And in today's climate of rampant identity theft, when government agencies have been unable to protect the security of personal and tax data, how likely is it that a collection agency will adequately safeguard taxpayers' information?”

And here is a response from an employee of an actual tax agency -

ü “I'm seeing lots of short-sightedness in federal and state budget planning. If society needs tax revenues . . . then governments need to put resources into administering the system.  Third party collection is a cop out.  Government tax workers, in theory, know the rules and can validate a debt.  We can also adequately see if your client’s position has merit when we eliminate debt.  Third party collection can do neither of these things.  By using a third party, governments are saying the tax revenues are important but the taxpayer is not. If tax revenue is important, why gut the tax agencies to the point that they're unable to provide service?”  

For my more than 2 cents on the question see my earlier post “No! No! A Million Times No!”.

My advice to anyone who is contacted by an outside collection agency regarding an alleged outstanding IRS, or state, tax delinquency has always been the same - write to the agency, with a copy to the IRS, and tell them that you refuse to deal with a private collection agency and will only deal directly with the IRS.    

So, what do you think?

TTFN

 

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