Private Tax Debt Collection Initiative Questioned

Posted on October 18, 2017

If you are a regular reader of this blog, you are aware that, by law, the IRS is required to give some taxpayer delinquent accounts to private tax debt collectors. 

According to National Taxpayer Advocate Nina Olson, the IRS has assigned 56,500 delinquent taxpayer accounts who owe over $407 million to the IRS to private debt collectors.

To date, the collection companies have brought in $945,000.00.  The private debt collection company gets to keep 25 percent of the money it collects.  However, Olson contends that IRS letters warning delinquent taxpayers that their accounts are about to be turned over to a private collection agency generates just as much money for the IRS without having to pay the private debt collector.

Olson also points out that the IRS’ budget was reduced by 20 percent in recent years and that the Taxpayer Advocate Service’s staff has been reduced by 450 people.  She contends that the IRS needs more funding in order to collect unpaid tax liability and is also worried about the morale of IRS employees as well as the morale of taxpayers in our voluntary tax compliance system.

We prefer a stronger IRS for several reasons.  First, a strong IRS will encourage greater voluntary compliance with the filing of tax returns and the honesty and accuracy of those tax returns.  Further, a strong IRS will also collect more money than a weaker IRS, which ensures that everybody pays their fair share.

Taxes are the price of freedom, but nobody wants to pay more than they have to, respectfully, if other people are not paying their fair share.  What do you think?

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