There’s nothing too crazy in there yet — any revolutionaries hoping to see the tax code scrapped in favor of a national sales tax will have to be satisfied with a “blue ribbon” group that the bill impanels to gravely consider such radical measures.
But there are a couple of items that may be of interest to Picket Line readers:
Sec. 501. Deduction of State and local general sales taxes in lieu of State and local income taxes.
Permits deduction of sales tax in lieu of state income tax for .
IRS will publish tables that estimate sales taxes for taxpayers in each state with various incomes and family situations.
Currently, when figuring out your federal income tax bill, you can deduct from your income any local and state income tax that you’ve paid.
However, ever since a tax “simplification” measure was passed, you aren’t allowed to deduct any local or state sales taxes.
That seems to be unfair to residents of states with high sales taxes, or with only a sales tax and no income tax (last I checked, there were nine such states), especially when compared to residents of those few states that have income taxes but no sales tax at all.
Back before , you could deduct all of the state and local taxes you paid.
You figured out your sales tax deduction either by carefully keeping track throughout the year, or (more likely) looking up an estimate in an IRS-maintained table of how much the average taxpayer with an adjusted gross income like yours paid.
The current bill’s text would restore the sales tax deduction, though I can’t tell from my casual reading of it whether it adds this to the state & local income tax deduction, or if you have to choose one or the other.
(Some earlier reports about this legislation have said that this is what the bill will do.)
The bill mentions the IRS-maintained tables, but not the option of deducting your actual payments.
This might be good news to some people using the income-lowering method of tax resistance, as their state sales tax payments might very well exceed their income tax payments (or they may live in a state without a state income tax) and this will give them an additional federal deduction.
Sec. 881. Qualified tax collection contracts.
Authorizes the Secretary to enter into qualified tax collection contracts with private collection agencies to perform certain services related to the collection of unpaid tax.
Provides that the United States shall not be liable for any act or omission of any such collection agency.
Permits a civil action against a collection agency, but not against the United States, for unauthorized collection actions.
Don’t you wish you could get away with putting “and furthermore, you can’t ever sue me, neener neener” at the end of everything you write?
Anyway, this is that proposal to let the IRS hire bounty hunters to go after debts it’s having a hard time collecting on its own.
Won’t that be fun.
When Reps. Shelley Moore Capito (R-W.Va.) and Chris Van Hollen (D-Md.) teamed up in to get the House to pass an amendment blocking the use of private companies to collect back taxes from delinquent taxpayers, it seemed the Bush administration plan might be doomed for at least a year.
But in the final hours of drafting a 3,300-page spending bill last month, House and Senate negotiators eliminated Capito’s and Van Hollen’s handiwork, clearing the way for the Internal Revenue Service to hire commercial debt collectors.
These private agents could keep as much as 25 percent of the amounts they recovered.…
Under the legislation, contractors will not have access to tax return information, other than the amount owed, and will have no role in determining the amount that is owed, officials said.
They will be given names, addresses, phone numbers and other identifying information about delinquent payers.
Private collectors will have authority to set up installment payment agreements, and gather financial information about those targeted, presumably to assess their ability to pay or to locate assets that might be attached.
No shocking revelations, but the San Francisco Chronicle fills in some blanks on how the new program will work in which the IRS uses private debt collection agencies to go after noncompliant taxpayers.
What Congress gives it can just as easily take away, and now a bipartisan collection of congresscritters are trying to take away the power they gave to the IRS just to outsource some of its collections process to bounty hunters.
The government began accepting bids from debt-collection agencies that it hoped to begin using as early as to go after billions of dollars in unpaid taxes.
IRS officials insist there will be no muscle involved — no knocks at the door, no midnight phone calls.
The private collectors will have none of the powers of enforcement that IRS workers have, such as the ability to impose tax liens and wage attachments.
…it turns out the government is due a lot.
According to [a] GAO report, Americans owed $120 billion in collectible taxes, including interest and penalties, in .
That was up from $112 billion the year before.…
A small number of companies, probably three, will be chosen to handle “balance due” cases during a trial period.
The collectors would be assigned only cases that involved more than $100, and where the taxpayer did not dispute the amount owed.
An example might include something such as a taxpayer mailing in a return but forgetting to enclose a check.
The IRS estimates that as much as $7.7 billion in delinquent tax debt is available for recovery in the initial phase.
If all goes well, the program will be fully implemented to include as many as a dozen contractors, who will take on a larger number of cases by .…
In soliciting bids, the IRS said private collectors would earn from 21% to 24% of what is collected, depending on the size of the debt.
So as you may remember, the IRS is trying to turn over some of its unpaid accounts to private debt collection agencies.
This means that some tax resisters may find themselves fielding calls from the Repo Man instead of the IRS.
The Repo Man will pocket 22–24% of what they’re able to collect before forwarding the rest to the IRS.
This gives tax resisters one answer to the question of “if you resist, won’t the government just add on interest and penalties and get more money than if you’d just paid ’em in the first place?”
On the other hand, I can anticipate this objection: just how different is a “private” debt collection agency doing contracts for the IRS from just another branch of federal theft enforcement?
All the money isn’t going to the Treasury, but all the money is going to the “government” writ large.
IRS Commissioner Mark Everson confirms that using private debt collection agencies instead of IRS employees to chase down money means less money for Washington:
Everson told Rep. Steven Rothman, D-N.J., he agreed with an assessment that using private agencies will cost the government more.
“I admit it.
I freely admit it,” Everson said.
The private agencies will get 22 to 24 percent of the tax money they collect, Everson told lawmakers on the House Appropriations subcommittee that oversees the IRS budget.
“It is wasting taxpayer money,” Rothman said.
“It’s offensive to me.
It’s offensive to my constituents.”
Everson disagreed that the program wastes taxpayer dollars.
It’s necessary to use the private companies, he said, because hiring more IRS employees shows up on the federal budget as an expenditure.
The budget doesn’t acknowledge the extra money that additional employees might collect.
The IRS must compete with other federal agencies for money at a time when deficits are increasing.
President Bush and Congress have been freezing or cutting budgets for all programs outside homeland security and defense.…
Private collectors will track down people who agree they owe taxes but haven’t paid.
The trial was to start , but protests by two companies that lost their bids to do collection work caused a delay of about three months.
In Oakland, California, the People’s Life Fund donated over $8,500 — most of this just the interest earned on an account that area tax resisters pay into in in lieu of paying their taxes — to an assortment of groups.
Afterwards, members of Northern California War Tax Resistance went to the nearby post office to hold up banners, hand out flyers, and project a slide show of war tax resistance info for the traffic jam of last-minute tax filers.
We were joined by some folks from Grandmothers for Peace who had organized their own Tax Day protest, and later by some members of the National Treasury Employees Union who came to the post office fresh from a union meeting to protest the IRS’s plans to use private debt collection agencies to pursue delinquent taxes.
At first it seemed a little awkward to be protesting alongside IRS agents who today were fighting to keep their jobs from being outsourced but tomorrow might be trying to seize our assets.
But the ones who had no signs of their own to wave took extra ones from us and, to our delight, we had employees of the U.S. Treasury and their families protesting war taxes right along with us!
The IRS is having a hard time getting its debt collection outsourcing program off the ground.
At Don’t Mess With Taxes, Kay Bell brings us up-to-date, and also reminds us that these debt collection agencies have certain legal obligations:
Under the law, for example, a third-party debt collector cannot:
Call you at all hours of the day and night.
Call you at work.
Use obscene or abusive language.
Threaten you with jail time or other actions the collector can’t legally take.
Reveal your alleged debt to others, including employers, parents, children, friends and neighbors.
Claim to be an attorney or send you documents that look like legal papers when they are not.
Expressly say or imply that you will be arrested if you do not pay your debt.
Threaten to seize, garnish, attach, or sell your property or wages unless the collection agency or creditor is legally able to do so and actually intends to follow through on the process.
And that’s just a small portion of the FDCPA rules and regulations.
The Privacy Rights Clearinghouse provides comprehensive information on the ins and outs of what is and isn’t allowed when it comes to debt collection.
The IRS can go ahead with its plan to ask private debt collection agencies to pursue people who haven’t paid their taxes:
The Government Accountability Office has denied two bid protests against the IRS, allowing the agency to immediately restart its controversial program to outsource taxpayer debt collection.
A GAO official confirmed with Tax Analysts on that a decision to deny the protests was issued on .
The IRS had originally awarded the first three private debt collection contracts in to Credit Recovery Inc., Linebarger Goggan Blair & Sampson LLP, and CBE Group, Inc., but issued stop work orders to the firms because of three protests by two unsuccessful
contract bidders.
“The IRS has rescinded its stop work order,” an IRS spokesman told Tax Analysts.
The article goes on to say that the debt collection agencies are likely to get their first accounts to pursue , but that Congress is still making noises about cutting off funding for the program.
The IRS is planning to go ahead with its plan to turn over some tax debts to private debt collection agencies, perhaps as early as :
The Internal Revenue Service has informed employees that it will begin using private debt collectors to track down tax delinquents starting in .
“I’m going to do everything I can to get every nickel that is owed to the government by people who haven’t paid their taxes,” IRS Commissioner Mark W. Everson said .
The IRS has estimated that debt collectors could pull in about $1.4 billion over 10 years.
Under a law, the IRS has hired three companies and will pay them on a sliding scale — from 21 cents to 24 cents for each dollar collected.
Everson said “a modest number of cases” will be turned over to the companies at the start, promising to “ramp this up deliberately and very carefully” to ensure that taxpayer privacy is protected.
This next paragraph from the news report puzzles me.
Does this mean that if a private debt collection agency comes after you, you can request in writing from the agency and the IRS to knock it off and go back to the old way of being pursued directly by the IRS?
According to an agency message, IRS employees will refer taxpayers with questions about debt collection notices to the private companies.
If taxpayers choose not to work with a debt collector, they must notify the contractor and the IRS in writing, the IRS told employees.
Private collection agencies under contract with us to collect overdue tax accounts are required to conform to the rules, regulations, and provisions of the Fair Debt Collections Practices Act.
Specific provisions of this act prohibit private collection agencies from threatening or intimidating taxpayers.
This law also provides for you to request your account be resolved by the original account holder (the IRS) rather than the assigned private collection agency.
If you do not wish to work with your assigned private collection agency to settle your overdue tax account, you must submit your request in writing to the private collection agency.
Private collection agencies cannot take any type of enforcement action against you to collect this debt (such as filing a Federal Tax Lien or issuing a levy).
However, the IRS does have the legal authority to take these type of enforcement actions to collect an overdue account.
Additional information on the program is found in these IRS publications and pages:
Some more information on the IRS plan to turn over some of its cases to private debt collection agencies, from the New York Times:
, the IRS will turn over data on 12,500 taxpayers — each of whom owes $25,000 or less in back taxes — to three collection agencies.
Larger debtors will continue to be pursued by IRS officers.
The move, an initiative of the Bush administration, represents the first step in a broader plan to outsource the collection of smaller tax debts to private companies over time.
Although IRS officials acknowledge that this will be much more expensive than doing it internally, they say that Congress has forced their hand by refusing to let them hire more revenue officers, who could pull in a lot of easy-to-collect money.
The private debt collection program is expected to bring in $1.4 billion over 10 years, with the collection agencies keeping about $330 million of that, or 22 to 24 cents on the dollar.
By hiring more revenue officers, the IRS could collect more than $9 billion each year and spend only $296 million — or about three cents on the dollar — to do so, Charles O. Rossotti, the computer systems entrepreneur who was commissioner , told Congress .
IRS officials on Friday characterized those figures as correct, but said that the plan Mr. Rossotti had proposed had been forestalled by Congress, which declined to authorize it to hire more revenue officers.
Privatizing government services is often promoted as a way to cut costs.
But the government would probably net $1.1 billion from private debt collectors over 10 years, compared with the $87 billion that could be reaped if the agency hired more revenue officers, as Mr. Rossotti had recommended.
Under federal budget rules, money spent to hire tax collectors is treated as a discretionary expense, and Congress is cutting discretionary spending.
In business terms, the rules treat the IRS as a cost center, not as the government’s profit center.
The private debt-collection program, however, is outside the budget rules because, except for the start-up costs, the collectors are to be paid from the proceeds.
Don’t know whether to laugh or cry? Try alternating between ’em.
The IRS is having a rough go of it.
It’s new plan to use private debt collectors is being denounced as a boondoggle, its information technology infrastructure is crumbling in such a way as to have cost them over $300 million in fraudulent refunds it has been unable to retrieve, and it has been caught inflating the numbers of audits of the wealthy by making those audits automated and superficial (and easier to hide assets from).
Oh yeah, and their headquarters is closed due to flood damage.
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.
The National Taxpayer Advocate’s office released its annual report to Congress .
There’s a wealth of interesting information in there (well, interesting if you’ve got some tax geek in you).
Some things that caught my eye:
“With regard to IRS’s stepped-up enforcement activity over the past few years, we are beginning to see signs that taxpayer rights are not being protected as well as they have been in recent years, particularly in the collection process.
Perhaps this is almost inevitable when enforcement is ramped up quickly and pressure is applied to program managers to show results, but we believe it is important to highlight our concerns and for the IRS to take our concerns seriously to avoid the risk that the enforcement over-zealousness which plagued the agency in will recur.”
“In , the IRS reported more delinquent tax dollars as ‘currently not collectible’ than it actually collected on active balance due accounts (TDAs), installment agreement accounts, and offers in compromise (OIC) combined.”
“IRS studies and external experts in collection confirm that collection cases 24 months past due generally yield less than 15 cents on the dollar and after three years are practically uncollectible.”
“Some aspects of the [private debt collection] plans reflect dramatic departures from IRS practice and impact taxpayer rights.
We would like to discuss some of the specifics in this report, but the IRS has advised us that much of the information in the PCA operational plans and calling scripts is designated as ‘proprietary information,’ and generally cannot be released without the consent of the PCAs.
The operational plans and calling scripts describe such things as belated Fair Debt Collection Practices Act (FDCPA) warnings and psychological techniques used to coax debtors into paying.”
(The report recommends that the private debt collection initiative be entirely scrapped.)
The IRS has been using an automated process of attaching 15% levies to federal payments to people with tax delinquencies.
Most typically, this is used to seize a portion of Social Security payments.
The IRS has used this power against people well below the poverty line, although for other sorts of levies and seizures it does take financial hardship into account.
A Congressional fight is ramping up over the IRS’s new privatized debt collection program.
One of the program’s defenders, Senator Chuck Grassley, sent a letter to his colleagues setting out his position.
There were some interesting statistics in the letter that I haven’t seen elsewhere.
For instance: “Every year, over $20 billion of unpaid taxes are lost due to the tolling of the 10-year statute of limitations.”
And:
[T]he average fully trained field function collection officer costs the government approximately $154,000 a year.
This includes salary, bonus, benefits, taxes, and a portion of direct overhead cost like supervision and administrative services, rent, travel, technology, telecommunications, postage, training, recruitment and other costs of business (not including a percentage of the Washington bureaucracy).
The Treasury Inspector General for Tax Administration found that in , these folks collected on average $577,000 each.
Now, that is an excellent return on investment, but simple math shows that for every dollar collected by these important IRS collection personnel, it cost the government conservatively 26 cents.
The site My War Tax purports to calculate how much you, personally, are paying for the Iraq War.
You type in your taxable income for , and the site calculates your bill for you (and lets you know how it made the calculation so you can see if it makes sense to you).
Kat Kanning wrote up the story of the civil disobedience actions that she, her husband Russell, Dave Ridley, and Lauren Canario have been doing at the IRS offices in Keene, New Hampshire, for the Keene Free Press.
NH Insider also did a story on the Dave Ridley case.
And if you’re tired of reading, you can watch an action-in-progress on YouTube.
As Kat Kanning’s article noted, this action was organized and enacted in less than twenty-four hours, and ten local activists attended on short notice.
The U.S. Congress is toying with the idea of shutting down the recently-adopted IRS practice of using private debt collection agencies to hunt down people who don’t pay taxes.
At a hearing, one Representative played a tape of one such private debt collection agency harassing its prey over the phone (here’s a PDF transcript).
The IRS is still having a hell of a time bringing its database into the 21st century. The latest TIGTA audit of the project found that the “pattern of deferring Project requirements to later releases and missing release deployment dates has continued” with yet another over-budget missed deadline and with requirements radically scaled-back at the last minute (some of these requirements have been deferred for over five years now).
How’s that IRS private debt collection agency program going?
Let’s ask the National Taxpayer Advocate:
It is not meeting revenue projections.
It is not more successful than the IRS at finding hard-to-locate taxpayers.
It is significantly less successful than IRS employees at fully resolving taxpayer past due accounts.
And:
The I.R.S. had expected private companies to collect $88 million but has now lowered that to as little as $23 million.
The collectors are paid almost a fourth of the money they bring in.
When the costs of government oversight are added in, [National Taxpayer Advocate Nina E. Olson] said, the program may even lose money.
Indeed:
Significantly, and contrary to projections made as recently as in , the expenses of the program to date exceed the revenue the program has generated.
“The cash economy is growing.
The percentage of all income subject to third party information reporting fell from 91.3 percent in to 81.6 percent in .
Moreover, the IRS expects the number of individual returns from small business or self-employed taxpayers to grow by about 33 percent , while the number of individual returns from other taxpayers is expected to decline by about 2 percent over the same period.”
, the IRS assessed $10 million in penalties against professional tax preparers for various forms of preparer misconduct.
But the agency only managed to collect $2 million of this $10 million.
It seems that tax preparers know the difference between a dog bark and a dog bite.
For tax year , the IRS identified more than 1.2 million cases in which someone failed to file a tax return even though they had taxable income.
In cases like these, the IRS creates a substitute tax return for the person, which (usually) results in a “default assessment.”
But, “the IRS collected just under two percent of the taxes assessed through the automated process, a sign that this method is not increasing filing and payment compliance.”
The IRS responds: “We… do not agree with the suggestion that dollars collected is the best measure of the effectiveness of these assessments.
Each assessment abated or adjusted reflects the submission of a return or other response by the taxpayer after the ASFR default assessment has been made — a clear indication <voice="darth vader">the taxpayer has been successfully brought into compliance</voice>.”
“A disregarded entity is a single member Limited Liability Company (LLC) that has not elected to be classified as a corporation.
It is called a disregarded entity because the owner reports business activity as if the entity did not exist.
For example, if the single member is an individual taxpayer, (LLC transactions are reported on the owner’s Form 1040 as if it is a sole proprietorship.
The compliance detection issue results from the owner of a disregarded entity using the tax identification number of an entity that does not have a filing requirement.
The IRS document matching program cannot match the disregarded entity income with the true owner and the income may go unreported.)”
“The earnings of an S corporation are taxed as ordinary income to its shareholders.
Unlike partnership or sole proprietor earnings, however, S corporation earnings are not subject to self-employment tax.
This difference in treatment gave rise to a tax planning strategy that treats shareholder compensation payments as distributions of profit to avoid payroll taxes.
Under this approach, officer/shareholders take no salary or a nominal salary and receive the remaining compensation as tax-free distributions.
The corporation saves payroll taxes and the shareholder ultimately pays only income taxes on his or her share of the corporate profits and avoids paying Social Security and Medicare taxes.”
However… “the IRS has repeatedly challenged and won the shareholder wage issue in court, [but] it is still used as a tax planning strategy.”
The IRS reported 18% more “Taxpayer Delinquent Accounts” in than in .
81% of these accounts involved tax years before , and many are “inactive.”
The Taxpayer Advocate purports to believe the following:
The United States tax system is based on a social contract between the government and its taxpayers — taxpayers agree to report and pay the taxes they owe and the government agrees to provide the service and oversight necessary to ensure that taxpayers can and will do so.
Without that unspoken agreement, tax administration in a modern democratic society could not function.
Thus, the government’s ability to raise revenue through voluntary tax compliance — the most efficient and economical form of tax compliance — rests on taxpayers’ belief that the government will honor its end of the social contract.
This “unspoken agreement,” says the Taxpayer Advocate, is overdue to be spoken — in the form of “a formal Taxpayer Bill of Rights” (which, since “a tax system that embeds rights also expects its taxpayers to conduct themselves in such a manner as to ensure those rights are not abused,” will also be “a statement of taxpayer obligations.”)
Naturally, this articulation of the unspoken agreement is not going to take the form of an actual negotiation or agreement.
It’s to be a top-down declaration emitted by Congress or the IRS for our benefit.
The IRS has released some preliminary data about tax year , and these show that the increasing “lucky ducky” trend — the percentage of Americans living under the income tax line — has pretty much levelled off.
, the percentage of those households who filed their tax returns but were below the income tax line was in the 18%–25% range.
, the numbers have gone way up.
for which I have stats look like this:
Tax Year
Number of Zero-Tax Filers
Zero-Tax Filers as a Percent of All Filers
2004
42,500,000
32.6%
2005
43,800,000
32.6%
2006
45,700,000
33.0%
Almost a third of American households who filed tax returns paid no federal income tax at all for — either they paid none to begin with, or all of what they paid was returned to them as a refund.
Federal Times seems pretty convinced that we’ve just about seen the end of the IRS program of assigning some of its tax delinquency cases to quasi-private debt collection agencies.
According to the Times, Congress won’t explicitly kill the program, but will underfund it to the point where it won’t be able to continue.
The IRS Miscalculates Interest and Penalties But Fails to Correct These Errors Due to Restrictive Abatement Policies.
A TAS study has found that the IRS is miscalculating the failure to pay penalty and could be negatively impacting about two million taxpayer accounts annually.
Moreover, the IRS’s manual calculations of interest yields an accuracy rate of only 67.7 percent, which means nearly one out of three restricted interest accounts are incorrectly computed.
The IRS is aware of, but has failed to correct, certain systemic problems that cause penalty and interest miscalculations.
These incorrect calculations lead numerous taxpayers to believe they have fully paid what the IRS says they owe, only to receive subsequent bills for accruals of interest, penalties, or both.
The IRS bears the cost of these inaccurate calculations, not only through rework by employees but also by taxpayers’ reduced confidence in the IRS.
The National Taxpayer Advocate recommends that the IRS consider allocating adequate resources toward planning and programming to resolve common penalty and interest computation issues, revising pertinent Internal Revenue Manual sections so all taxpayers are entitled to accuracy reviews of interest and penalty calculations, and re-evaluating the overly complex restricted interest procedures to make certain that all taxpayers receive accurate interest charges.
I know in my case I’ve suspected that the IRS has been figuring the penalties & interest incorrectly — in part because they have incorrectly wrapped the first dose of penalties & interest into the initial assessment.
However, the process isn’t transparent enough for me to verify my suspicions.
Among the other things in the TAS report were a call to eliminate the outsourcing of delinquent tax collection and a recommendation that the IRS develop some way to tax transactions taking place in virtual worlds such as multi-player on-line video games.
This was one of the many experiments in potemkin “privatization” the government has engaged in of late.
For us tax resisters, the upshot was that instead of having the IRS calling us up and sending us nasty letters demanding that we pay up, we might instead find ourselves getting those calls and letters from “Pioneer Credit Recovery” or some such.
These private debt collection agencies had no flexibility with which to negotiate the tax debt (they couldn’t negotiate an offer-in-compromise or adjudicate a dispute over the amount of the tax debt) and no real power to enforce sanctions (they couldn’t initiate liens, levies, and seizures).
So for the tax resister, having your account handed off to a private debt collection agency was mostly just an opportunity to stonewall.
But in any case, the program is no more.
The existing contracts end .
The IRS says that it hopes to be able to hire more enforcement personnel in-house to take on the work they had been outsourcing.
Some bits and pieces from here and there:
Carl Watner, proprietor of Voluntaryist.com has put out an anthology of works critical of the practice of taxation: Render Not: The Case Against Taxation.
“Some goods and services are essential to human survival, but voluntaryists realize that they need not be provided by the government on a coercive basis.
What we oppose is the coercion involved in collecting taxes.
We oppose the means and take the position that the ends never justifies the means.”
Austerity for the citizens and tax payers, more money for the banks and tax farmers: that’s the message the European ruling class is giving the people of Greece, and the Greeks are experimenting with ways of saying “forget it,” or in Greek: “ΔΕΝ ΠΛΗΡΩΝΩ” (I won’t pay).
The Greek government intends to combat tax resistance and evasion by increasing fees, fines, and tolls, and by slapping a tax onto electric bills: so “sales of generators have shot up” and people are threatening to simply not pay the extras.
The government says it will shut off power to those who resist, but as one resister put it: “when 70% of Greek households don’t pay it, what are they going to do?
Cut off the whole lot?”
Greek resisters are also occupying toll booths and waving cars through, sabotaging public transit ticketing machines, and unionists at the power corporation have refused to print out and send bills that contain the new tax.
The IRS has finally taken notice of Cindy Sheehan’s tax resistance, and recently took the unusual step of issuing her a summons to bring all the details of her financial life to their office so they can decide how much of it to seize.
Her response?
“We will never pay, so stop harassing us.”
A while back, the U.S. government experimented with turning some of its naughty delinquent taxpayers over to private debt collection agencies.
This, they hoped, would result in increased tax revenue, a new source of corporate profit, and some nice campaign contribution kickbacks.
It was a bit of a boondoggle, was naturally opposed by the union representing IRS employees, and was scrapped in .
But then what happened to all those cases that had been given to the private debt collection companies and then reverted to the IRS?
The Treasury Inspector General for Tax Administration took a look. In the sample of cases they investigated, on nearly half the IRS had taken no collection actions since the cases had been returned to them.
This coming tax season, “shared responsibility” fines for people without qualifying health insurance are going to hit for realsies.
The IRS is by law somewhat hobbled in pursuing people who refuse to pay these fines, and when you combine that with conservative hostility toward Obamacare, you have a recipe for a potential wave of tax resistance.
It looks like the experiment of using private bill collectors to go after unpaid federal taxes is back.
It seems this on-again/off-again experiment has little to do with collecting taxes, and more to do with a tug-of-war between Democrats and Republicans on whether to reward Democrat-leaning public employee unions or Republican-leaning government contractors.
Irwin Schiff, one of the most bull-headed and influential of the “show-me-the-law”-style tax protesters in the United States in recent years, died in prison recently.
He developed cancer while in prison, and died shackled to a prison hospital bed, as his son Peter recounts:
As the cancer consumed him, his voice changed and the prison phone system no longer recognized it, so he could not even talk with family members on the phone during his final month of life.
When his condition deteriorated to the point where he needed to be hospitalized, government employees blindly followed orders that kept him shackled to his bed.
This despite the fact that escape was impossible for an 87 year old terminally ill, legally blind patient who could barely breathe, let alone walk.
Some news of interest to tax resisters in the U.S.:
The on-again/off-again boondoggle of the federal government contracting out to private debt collection agencies to pursue people behind on their taxes is apparently back on again.
By including the program in a new transportation bill, its proponents could use the income they hope to see from the program to offset other spending.
It would probably be more efficient for the government just to hire more IRS agents to go after the money, but there are few things a Republican Congress would be less likely to do than give the IRS more money to increase the ranks of the National Treasury Employees Union.
My guess is that these private debt collectors are going to have a hell of a time.
Since the last time this sort of plan was floated, a massive, years-long, ongoing, coast-to-coast scam has been in progress in which callers impersonating tax collectors have been getting victims to pony up money.
News reports follow in the wake of the heists, all saying that if someone calls you up about a supposed tax debt, it’s a scam.
The private agencies are gonna have a hell of a time distinguishing themselves from the scammers.
If the program is like the last one (and I haven’t seen the details yet, so I’m not sure), the agencies will be able to keep 25% of what they collect for themselves.
It’s small consolation, but some consolation, to know that at least some of the money won’t be going directly to the government.
In more troubling news, another part of the same Transportation bill would revoke passports from people who are behind on their taxes by more than $50,000.
I’ll probably hit the $50k mark in a couple of years, so I take this very personally.
The bill hasn’t become law just yet.
They’re still ironing out the differences between the House and Senate versions.
But both houses’ versions had both of these proposals, so they seem likely to survive (though it’s not unheard of for parts of legislation that are passed by each house to wind up on the cutting room floor regardless, whatever you may have heard on Schoolhouse Rock).
Obama is expected to sign the bill into law either way.
When the final bill is passed and signed I’ll take another look and investigate what the process of passport denial/revocation might actually look like in practice.
And I’ll of course post something here if my own passport gets yanked.
I may even accept that as a challenge and see if I can row a boat to Cuba or wade across the Rio Grande.
The on-again/off-again IRS policy of farming out some of their underworked tax cases to quasi-private debt collection companies is… on again.
These companies are scheduled to begin their work .
They will work on cases in which the taxpayer has years-old unpaid taxes that the IRS has stopped trying to actively collect for whatever reason.
These private debt collection agencies have no flexibility with which to negotiate the tax debt (they can’t negotiate an offer-in-compromise or adjudicate a dispute over the amount of the debt) and no real power to enforce sanctions (they can’t initiate liens, levies, and seizures).
So for the tax resister, having your account handed off to a private debt collection agency is mostly just an opportunity to stonewall.
The agencies are required to follow the Fair Debt Collection Practices Act.
If you find your case assigned to one of these agencies, you may want to familiarize yourself with the provisions of this act so you can strike back if they try any funny stuff.
The four companies who are going to be pursuing tax debts for the government are CBE Group, Conserve, Performant, and Pioneer.
Some links that have slid past my browser viewport in recent days:
Kirk Johnson at the New York Times looks at counties in southwest Oregon where popular anti-tax sentiment has grown to the point where citizens have been able to largely defund their local governments through the ballot box.
Peter J. Reilly assesses the new IRS policy of deputizing private debt companies to pursue delinquent taxpayers, and he concludes: “You Should Just Hang Up On IRS Collection Calls, Legitimate Or Not.”
This is for two reasons: 1) there are still a lot of scammers out there impersonating the IRS who try to fool people into paying them money, and it may not be easy for the average Joe to distinguish “legitimate” collection calls from scammers;
and 2) the “legitimate” private debt collection agencies can’t negotiate or adjudicate the amount of your debt, nor can they seize the money from you.
All they can do is badger you about it.
So your best bet is just to stonewall them, ignore them, and wait patiently for the statute of limitations to run out on your debt.
Laura Saunders, in the Wall Street Journal, notes that many online sellers and workers in the gig economy fall into an income-reporting shadow:
A loophole is helping gig-economy workers, online sellers and home-sharing hosts cheat on their taxes.
Under a law enacted in and later clarified by the Internal Revenue Service, many online-platform businesses that connect buyers and sellers and take credit-card payments, such as Airbnb, TaskRabbit, Etsy and ride-sharing firms, fall into a special category.
These businesses have to report a provider’s income to the IRS only if that person earns more than $20,000 and has more than 200 transactions.
In that case, the company sends both the provider and IRS a Form 1099-K listing gross income.
By contrast, freelance workers who don’t use such platforms often face a much stiffer reporting threshold of $600 for Form 1099-MISC.
For example, if a hardware store pays a plumber $750 directly for work done, the store is supposed to send both the IRS and the plumber a 1099-MISC listing that amount.
Larry Bassett, a long-time war tax resister who, because of an inheritance, engaged in an unusually-large tax refusal this year, is now also the focus of a documentary-in-progress:
The Pacifist.
Marco Mori advocates a low-risk tax resistance strategy for Italians that seems to involve withholding taxes as long as possible, putting up with the civil penalties and interest, and only paying at the last minute before your case becomes a criminal matter.
I don’t know Italian, so have to piece things together from Google Translate.
The shit-stirrers and would-be provocateurs at 4chan’s “/pol/” forum (which stands for “politically incorrect,” but is largely just puerile racist caricatures), struck upon the idea of trying to invent a #NoTaxForBlacks (or #NoTaxFromBlacks) movement.
They would do this by means of a variety of more-or-less plausible-looking meme images, crowdsourced by the /pol/glodytes.
Ostensible Black Americans (fake Twitter accounts with names like “Tyrone Johnson”) would post these, saying they were refusing to pay taxes based on roughly the same sort of grievances that have motivated #BlackLivesMatter.
The way this was supposed to play out so as to titillate the 4chan crowd was that unsophisticated black people would go along with the ruse and refuse to pay tax, this would give the government an excuse to cut welfare and to arrest more black people for tax evasion, ergo much lulz for 4chan.
brief notes about issues of interest to tax resisters, including: the private debt collection companies that the IRS has deputized to collect taxes, and how to do war tax resistance counseling in a “nondirective” way
updates from the NWTRCC field organizer, and a note from new anti-Trump tax resister Andrew Newman
The IRS has launched a “view your tax account” service.
If you’re a resister and want to keep an eye on how much money they’re after you for, this is a convenient way to do it.
This service supplements the agency’s “Get Transcript” service, with which you can get more detailed information about your account, your past filings, IRS actions taken with regards to your account, and what it knows about your income sources.
In , a “Sale of Suffragette’s
Goods at Southend” made the headlines when the first public auction of goods
seized by bailiffs in default of payment of the ‘king’s taxes’ by a local
suffragette took place.
The suffragette in question was a Mrs Rosina Sky. A member of the Southend
and Westcliff branch of the WSPU
and of the Women’s Tax Resistance League, Mrs Sky had refused to pay £5 tax,
as required by law. As a result a “quantity of silver goods” were taken from
her home in Cliff Town Road and sold at a public auction.
The Southend Standard intimated how this form of
passive resistance was beginning to work. The article described how the
auction chairman was happy to allow a pro suffragette representative, a ‘Mrs
Kineton-Parkes’, to take to the stage to speak in Mrs Sky’s favour, saying
“taxation and representation must go together.”
“Mrs Sky has paid her taxes for over 20 years and fulfilled loyally every
duty of a citizen,” the auction was told. Half a dozen silver dessert spoons
and some other silverware were sold off to a member of the public
sympathetic to Mrs Sky’s cause, meaning the entire lot did not need to go
under the hammer and could be returned to her.
Following the auction, according to the newspaper, a crowd — made up of
members of the public who had attended the auction as well as
representatives of the WSPU
and the WTRL — marched
along Southchurch Road to Southend Technical Colleges where more speeches
were held. The article reported how “a lot of chaff being indulged the
while” as the protesters made their way through the streets.
Rosina Sky
Here’s another example of a suspicious package shutting down an IRS building, this time in Austin.
Sounds like it was a false positive triggered by an overcautious dog on bomb-sniffing duty.
In a separate incident in Philadelphia, several employees “suffer[ed] eye irritation” when they “came in contact with a wet envelope that had a sweet smell” — so that sounds more serious.
The IRS told tax preparers they would have to get identification numbers — PTINs — so the agency could keep track of them.
Then it told them they would have to buy these numbers from the agency at $64 a pop.
Some preparers sued, saying this amounted to the IRS inventing its own tax to fund itself, without going through Congress for legally-authorized funding.
The judge hearing the suit agreed and said that not only were the fees illegal, but that the agency would have to fully refund the estimated $175–300 million it has collected from selling the numbers so far.
That’s about 1½–2½% of the agency’s annual budget.
In Congress told the State Department to deny passports to, and revoke passports from, people with large federal tax debts.
But I have yet to hear about anyone actually having their passport revoked or denied because of this.
Here’s an update on the policy, from the Taxpayer Advocate Service’s Annual Report to Congress, that explains why:
In , Congress passed the Fixing America’s Surface Transportation (FAST) Act, which requires the Department of State to deny an individual’s passport application and allows the Department of State to revoke or limit an individual’s passport if the IRS has certified the individual as having a seriously delinquent tax debt.
Although the IRS does not plan to implement the passport certification program until , the proposed IRS procedures and policies raise concerns about how the program will harm taxpayers and infringe upon their rights.
Currently, an estimated 270,000 taxpayers meet the criteria for a seriously delinquent tax debt and do not meet one of the statutory exceptions or discretionary exclusions to certification.
The IRS expects to certify 2,700 taxpayers when it initially implements the program in , and continue with certifications throughout the year in phases based on taxpayer response rates.
At this time, the IRS will not be sending recommendations or requests to the Department of State to revoke taxpayers’ passports; although, the Department of State will revoke passports in accordance with its longstanding procedures.
This suggests to me that if you have such a tax debt (defined as one in excess of $50,000 $51,000), you may want to file an expedited request to renew your passport as soon as possible.
They may renew your passport before the IRS gets around to sending in your name, and may not get around to filing a revocation recommendation any time soon.
If you wait, however, you may find it difficult to renew your passport when it expires.
The Taxpayer Advocate Service, by the way, is very critical of how the IRS is implementing the program.
It concludes:
Taxpayers have a constitutional right to travel, and the IRS risks abridging this right by declining to adopt additional taxpayer protections, such as stand-alone pre-certification notices that provide taxpayers with the right to challenge the IRS’s position and be heard.
(That italicized phrase comes from the Taxpayer Bill of Rights which the IRS adopted as a sort of aspirational or public-relations document in lieu of adopting actual policies to protect taxpayer rights.)
Kay Bell, at Don’t Mess with Taxes, reports on how the IRS’s fleet of private debt collection companies tangled with the wrong guy. The victim, who did not actually owe the IRS anything (his debts had been discharged in bankruptcy), sued the debt collectors for illegal harassment and won.
Neighbors of a homeless encampment in a park in Vancouver are threatening to withhold their taxes to pressure the government to do something about it.
The Vancouver Sun painted this as a NIMBY-hostility-to-the-homeless issue, but one of the neighbors took to Twitter to explain that they’re trying to pressure the government not to act against the homeless encampment, but in assistance of those who live there.
NWTRCC kicked off this year’s federal tax filing season with a panel consisting of the experienced war tax resisters Kathy Kelly, Sam Yerger, Erica Leigh, Charlie Hurst, and Maria Smith, who explained their approaches to resistance and took questions from a live audience.
You can view a video of the panel and the Q&A here.
[S]uppose… that the governor of a state like Texas or Florida were to say: Citizens of this state should not pay federal taxes this year, and our state will indemnify its citizens against federal prosecution. In other words, the state would assume the federal tax bill for its own citizens, and declare it null and void.
Meanwhile, one of the more unhinged Trumperists decided it would be a good idea to publicly tweet an increasingly violent series of fantasies including threatening the life of a traffic cop, killing Nancy Pelosi, running over “a million people” in a speeding car, and… bombing the IRS headquarters.
That last bit got him indicted on federal charges.
TIGTA has released another report on the federal government’s use of private debt collection companies to pursue unpaid taxes.
The report says that the companies recovered a mere 1.79% of the unpaid taxes they were assigned, and that more than a third of the money collected went to cover costs and profit for the private companies, with the remainder going to the Treasury.
The National Taxpayer Advocate also released its report recently.
It highlights some of the many problems the IRS had to cope with and/or exacerbate during the year of pandemic shutdowns and greater-than-usual government dysfunction.
For example:
Taxpayers got misleading tax notices that included deadlines to respond that had already passed by the time the notice was sent.
People who tried to call the IRS were able to get through to an agency employee less than 25% of the time.
Taxpayer records are processed on “the oldest major IT systems in the federal government,” but Congress has appropriated only about 8¼% of the estimated cost of updating them.
Hey, what do you know?
Another tax strike is brewing in South Kivu.
This strike, which is scheduled to start in , is meant to pressure the government to repair roads and bridges in the region.
Some tabs that have slid through my browser in recent days:
At the NWTRCC blog, tax resister William E. Ruhaak shared his experience trying to get the government to acknowledge his carefully-drafted, personal “statement of conscience.”
He fought a determined pro se legal battle to get the U.S. Tax Court to admit his statement of conscience as evidence in his tax appeal.
He believes such a struggle is important in order to defend “The fundamental human right to publicly express an opinion or belief.
And also the right to have a written expression of that belief included in government documentation for future reference.”
The Court eventually gave in and added his statement as a piece of evidence, but seemingly only to humor him.
The ruling in his case reads in part:
We nevertheless admonish petitioner that instituting future proceedings before the Tax Court for the purpose of advancing frivolous arguments relating to his conscientious objection to the payment of Federal taxes is likely to result in the imposition of a significant section 6673 penalty against him.
We recognized four decades ago that “there has been a long and undeviating parade of cases in this and other courts” rejecting the arguments of conscientious objectors who sought to avoid paying “the part of their taxes which they estimated to be attributable to military expenditures and to which they objected because of their religious, moral, and ethical objections to war and because of their claimed ‘rights’ under various constitutional provisions, the Nuremberg Principles, international law, and numerous international agreements and treaties.”
Greenberg v. Commissioner, 73 T.C. 806, 810 ().
At this late date, the Court will not condone the continued assertion of similar frivolous positions in meritless litigation that wastes both its own limited resources and those of the IRS.
The War Resisters League has released its annual “Where Your Income Tax Money Really Goes” pie chart fliers, based on the Biden Administration’s proposed budget for .
As Pentagon spending continues to rise, and yet more millions are being spent to arm Ukraine, pie chart aficionados may be surprised to see that the military-spending slice of the pie chart seems to have noticibly shrunk this year.
Ed Hedemann and Ruth Benn, who do the research and composition for the pie chart, explain why.
In part, the reason is that they are operating on the proposed budget, not whatever budget (and supplementary appropriations) Congress will eventually, tardily enact.
The Biden Administration’s proposed budget is chockablock with a wish list of non-military spending that Congress will probably not enact.
The absolute amount of military spending has risen substantially, but relatively it looks smaller because of all that extra wish list spending.
The latest NWTRCC newsletter is out, with a preview of the upcoming tax filing season and other news from the American war tax resistance scene.
The only thing that comes close to the problems we’re seeing now at the Internal Revenue Service was in 1985, when the agency was rolling out some new technology—technology it’s still using today.
Back then, the processing centers got so behind on their work that employees started hiding tax returns in closets and putting them in bags in the trash.
Now it’s way worse, with the IRS, for the second year in a row, entering the filing season with a backlog of millions of not yet processed returns and pieces of correspondence.
The current National Taxpayer Advocate released an amusing blog post about how pathetic and outdated the IRS processes for handling tax returns are. Excerpts:
When I released my annual report in , I said that paper is the IRS’s Kryptonite and the IRS is buried in it.
The reason paper returns are so challenging is that the IRS still has not implemented technology to machine read them, so each digit on every paper return must be manually keystroked into IRS systems by an employee.
The IRS has announced that it plans to hire thousands of new workers to try to deal with its paperwork backlog.
But, in a tight labor market, and unable to offer competitive pay rates to compensate for the soul-crushing tedium ($15.61/hour anyone?), they’re finding it a challenge to turn those plans into personnel.
The Washington Post took a look at a recent job fair the agency held.
IRS employees don’t follow the rules on paid time-off, with a suspicious pattern of sick leave days allowing employees to make their own three-day weekends and extended holidays.
Catalan separatist group / government-in-exile Council for the Republic is promoting a tax redirection campaign in which Catalan citizens withhold the portion of their taxes that would go to the Spanish monarchy or to its repression apparatus, and give that money instead to Front Republicà d’Acció Solidària or some such group working for Catalan independence.
Doomed, quixotic, gonzo tax resister John McAfee is trying to get in the last word by means of a set of interviews he gave when he was on the run from the law.
In them, he explains why he stopped paying. Excerpts:
I’d just had enough.
I’d paid $50 million in income tax over the years.
I thought that was plenty.
I hadn’t paid tax since I went to Belize, but technically, as an American citizen, even if you’re not living in the country, using the services and driving on the roads, you still have to file and pay 30% of your income to the United States.
The only two countries in the world that enforce that rule are the United States and Eritrea!
How [frigging] bizarre is that?
Anyway, I just said, “I’m sorry.
This is insane.
I’m not doing this anymore.”
[I]n America, income tax is in fact unconstitutional anyway.
It was only ever created to fund the war effort in , but that edict, like many others, was never extinguished after the need for it ceased to exist.
I was telling people that I thought taxes were illegal, and if they also felt that they were illegal and/or unjust they should just stop paying, too.
Not just that, I was showing them how to do it without getting caught.
I stumbled somehow on the No Obligation Challenge website.
It looks like a U.K. version of the familiar U.S. tax protester song-and-dance (“Did you know there is no law obligating you to pay council tax?”) but I was impressed by the quality of the graphic design and layout of the website, which is head and shoulders above what I usually see from that segment of the fringe.
