The Government Accountability Office has put out a report on the IRS’s new program to use private collection agencies to go after those tax delinquents that the IRS is too underfunded to pursue itself: Tax Debt Collection: IRS Needs to Complete Steps to Help Ensure Contracting Out Achieves Desired Results and Best Use of Federal Resources.
I mention the report because it contains another set of clues about how the IRS is rolling-out this program — clues that might be helpful for those tax resisters who find themselves in its path.
First off, if you do find yourself the target of one of these private bill collectors, I have two pieces of advice: 1) know your rights, and 2) stonewall. The first bit of advice is because these collection agencies are (in theory) going to be operating under a strict code of conduct that they’ll be more likely to adhere to if they know that you know about it. The second bit of advice is because these private collection agencies are going to have no real power: they can’t seize your property or your paycheck on the one hand, and they can’t negotiate about the amount of the debt on the other.
For the tax resister, there’s nothing to be gained or lost by talking with them. As far as I can see, the best policy will be to listen more-or-less politely to their cajoling when they call or visit, and then ignore them. They’ll sit on your case for at least six months, trying the various tricks in their bag of debt collection techniques, before giving up.
Curiously, the money seized by these private collection agencies is going to be accounted for differently than other money that the IRS collects. For starters, as I’ve mentioned before, these agencies get to keep 25% of what they collect before turning the rest over to the government. This new GAO report adds a detail I hadn’t heard: “IRS is authorized to… retain another 25 percent of taxes collected to fund IRS collection enforcement activities” [emphasis mine].
The good news is that 50% of the taxes these private debt collectors make off with won’t go to Congress. The bad news is that it’ll be used to fund more tax collection, which will eventually have the same undesirable effects.
Also in the report is a more detailed description of who is being targeted in the initial phase of the program:
IRS initially envisions using PCAs on simpler cases that have no need for IRS enforcement action and that involve individual taxpayers that (1) filed showing taxes due but did not pay all those taxes and (2) made three or more voluntary payments to satisfy an additional tax assessed by IRS but have stopped the payments. To start, IRS plans to send cases to PCAs that have not recently been worked by IRS because of their lower priority, such as cases set aside because of inadequate IRS resources to work them or those in the queue to be worked but not yet assigned to IRS staff. After gaining some experience, IRS plans to expand the types of cases to be sent to PCAs to include those unassigned cases that IRS staff now may work, including those in which IRS attempts to find taxpayers that appeared to not file required tax returns, according to IRS officials.
The costs of this program are high. Above and beyond the 25% that the private collection agencies will skim off the top, the IRS is assigning 65 people from its own staff to oversee the program in its initial phase, and estimates its overall costs to administer the program to be anywhere from 67 to 110% of the anticipated revenues during the roll-out phase, and 55% of the anticipated revenues once the program gets fully up-to-speed.