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Tax debts could be sent to collections under proposed bill


A new measure has been proposed in the U.S. Senate that would require the Internal Revenue Service to send delinquent tax debts to a private debt collector. If it becomes law, the measure would require the IRS to send unpaid tax bills to collections if the IRS is unable to locate or make contact with the debtor for a year.

The U.S. Taxpayer Advocate said in a letter to lawmakers that sending unpaid tax debts to private debt collection agencies would be a “bad idea,” and is one that has failed in the past. Additionally, the taxpayer advocate told lawmakers that the measure would unfairly target the nation’s poor and vulnerable taxpayers.

She reminded lawmakers that the IRS previously used private collection agencies to collect back taxes from 2005 to 2009, during which time $98 million was collected from delinquent taxpayers. However, the private collection agencies took $16.5 million as commission and $86 million was spent by the IRS to carry out the program.

The official taxpayer advocate to Congress also said that her office received masses of complaints from Americans who were hounded and harassed by debt collectors trying to track down the unpaid taxes. She said that the debt collectors also did not have authority to negotiate lower payoff settlements with individuals, which is something that the IRS makes a priority.

The measure was included somewhat inconspicuously within a larger bill that renews several tax breaks that have expired. The measure came at the request of a senator from New York, a state that two of the four private debt collection agencies that would benefit from the measure call home.

As the taxpayer advocate alluded to, the IRS often is willing to negotiate a tax debt settlement plan with individuals who owe significant back taxes, which is why it’s best to face tax debt head-on instead of avoiding it.

However, the process can be complex and intimidating, which is why many people seek out an experienced tax attorney for assistance and representation during the process.

Source: The Washington Post, “Congress moves to turn back taxes over to debt collectors,” Lori Montgomery, May 15, 2014

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