47 percent of former private tax debt collection cases left untouched by IRS
Sunday, November 13, 2011
When the IRS ended its controversial private tax debt collection program in 2009, Commissioner Douglas Shulman echoed the belief of consumer advocates and many members of Congress that such a job was more properly suited to federal employees, not hired hands.
"I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward," said Shulman back then.
Apparently the commish was misinformed.
A statistical sample of the previous private tax debt collection cases by the Treasury Inspector General for Tax Administration (TIGTA) found that almost half of the taxpayer accounts returned to the IRS by fired private collectors have not been followed up on by the feds.
And that sampling's finding of 47 percent of languishing past-due tax cases is this week's By the Numbers figure.
The cases formerly pursued by private tax collectors were not selected by the IRS for continued collection action due to collection policies and inventory assignment practices at the agency, according to the TIGTA report.
That decision, says TIGTA, led to an estimated $30.7 million in collections that would remain as outstanding.
In addition, TIGTA analysts found that the IRS might not collect an additional $103.2 million per year, or $516 million over the next five years, from similar cases in its inventory that would have been assigned to the private tax debt collection program if it had stayed in effect.
Dueling data: The IRS, not surprisingly, disagrees with the TIGTA findings about how it has absorbed the private tax debt collection cases.
In a letter that is included as an appendix to the report, Faris Fink, commissioner of the IRS Small Business/Self-Employed Division, said TIGTA's estimates of potential taxes that will go uncollected were inflated.
TIGTA's methodology "assumes future collection rates that are unsupported by actual results and excludes potential revenue actions that may result from the IRS working these accounts in the future," wrote Fink.
He also said it was misleading for TIGTA to characterize the returned private tax collection cases as not being worked by the IRS.
"Cases that remain unresolved are subject to refund offsets, systemic levy programs, and federal tax lien filing, and will receive written correspondence from the IRS on a regular basis," Fink wrote.
As for TIGTA suggestions on how the IRS can better review tax case assignment practices, Fink said that the agency "continually reviews and updates its collection practices and operations, including inventory selection."
On Capitol Hill, an ardent advocate for the private tax debt collection program had harsh words for the IRS in the wake of the TIGTA report.
"The IRS assured us all that the agency could do a better job with these tax cases than outside firms and didn't need any help," said Senator Charles Grassley (R-Iowa) in a statement. "It turns out that the IRS isn't doing a better job and in many cases, isn't doing the job at all. The IRS and Treasury Department went out of their way to stop a means of collecting tax debt that the IRS otherwise will never collect. They bowed to union pressure and terminated an alternative collection program before it had a chance to reach its full potential."
IRS workers chime in: Treasury employees disagreed with the TIGTA numbers, but also remained committed to the end of the program that federal workers said eliminated their jobs.
National Treasury Employees Union President Colleen Kelley said in a statement to Tax Analysts that the sampling used by TIGTA was "far too small" to be representative.
Still, said the union leader, the IRS use of private debt collectors "was a financial failure by any measure." And despite the TIGTA findings, Kelly said the IRS is best positioned to assist taxpayers in meeting their tax obligations.
On that the Treasury workers and TIGTA agree.
"The IRS must do its best to work these cases, since taxpayers who do not timely pay all their taxes create an unfair burden on taxpayers who do," said J. Russell George, Treasury Inspector General for Tax Administration. "This sense of unfairness can erode the public's respect for the tax system."
You also might find these items of interest:
Penalties on your tax delinquency add up. Proving to the IRS that you cannot pay these penalties can mean a reduction in the total amount due. Keep in mind, however, that interest on such penalties will not be forgiven.
Posted by: tax debts | Thursday, January 19, 2012 at 01:54 AM
Once again, the IRS commissioner is demonstrating that he has no idea what his employees are doing. First of all, they have no incentive whatever to take on these additional collection cases, as they feel that they have enough to do??? Secondly, the outside firms have a lot of incentive to collect...a fee percentage on recovered money. Even if they were paid half of what they collect, it would be much, much more that the IRS would collect.
Posted by: Gustav | Friday, December 02, 2011 at 11:56 AM
I'm retired from the Military and I have paid taxes most of my life. The key to this is that I have pay taxes at least twice if not more on the things I buy after the government has taken taxes out of my pay check. I beleive that the fairtax would be better for us because we
would not pay taxes on our retired pay and would receive the prebate as well. I would like to see more states getting in the fairtax arena. In the long run this would do away with the IRS all together and the tax code too.
Posted by: fairtax guy6 | Monday, November 14, 2011 at 07:48 AM