Tax News

CCH (cch.taxgroup.com) reports:

Private debt collectors would be barred from collecting unpaid tax debts on behalf of the IRS under the Tax Collection Responsibility Bill of 2007 (HR 3056) approved by the House on October 10. Support for the measure fell predictably along partisan lines, with Democrats complaining that private collection agencies (PCAs) are not nearly as efficient as IRS employees. Republican lawmakers noted that PCAs have been successful while never violating the rights of American taxpayers under the Fair Debt Collection Practices Act (P.L. 104-208). The measure was approved by a vote of 232 to 173.
House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., said the bill is intended to stop so-called "bounty hunters" from earning a commission by harassing taxpayers for money owed to the Treasury. IRS employees collect unpaid taxes at a much faster pace than PCAs, or about $20 collected for every $1 spent on collections, Democrats said. Rangel's committee passed the debt collection bill in mid July (TAXDAY, 2007/07/19, C.1).
Committee member Kevin Brady, R-Texas, said that the successful partnership between the IRS and PSAs would raise $1 billion over a 10-year period. Democrats would have to raise taxes on other Americans in order to stop PSAs from collecting unpaid tax debts, opponents of the measure said. Meanwhile, the Service is understaffed and unable to collect money from these hard-to-reach taxpayers, they added. In response, House Majority Leader Steny Hoyer, D-Md., said Democrats believe it is not good public policy to turn over taxpayer's Social Security numbers and other private identification information to private agencies. He said Democrats believe that the collection of taxes is a core government function that should ensure that all taxpayers pay their fair share of taxes.
The White House has issued a veto threat against the bill, saying that terminating the PCA program would result in a loss of significant revenue over the next 10 years. These are tax dollars that are legally owed to the government and that are otherwise not likely to be collected by the IRS, the administration said.
Senate Response
Senate Finance Committee ranking member Charles E. Grassley, R-Iowa, said that the House bill to terminate the IRS's private debt collection program was "dead on arrival in the Senate" because it attempts to stop a program that is new, yet already working. "Opponents raise the fear of rogue private operators treading all over taxpayers' rights," said Grassley in a prepared statement. "But the program has multiple layers of scrutiny to make sure taxpayers' rights are fully protected." He noted that the House bill would allow the IRS to impose penalties and interest indefinitely on a taxpayer even if the person has not received formal notice from the Service. "If that's not anti-taxpayer, I don't know what is," said Grassley.
By Jeff Carlson and Stephen K. Cooper, CCH News Staff
SFC Release: Sen. Grassley's Comments on the IRS's Private Debt Collection Program
Statement of Administration Policy on HR 3056-To Repeal the Authority of the IRS to Use Private Debt Collection Companies, to Delay Implementation of Withholding Taxes on Government Contractors, to Revise the Tax Rules on Expatriation, and for Other Purposes