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IRS is unleashing collection agencies on taxpayers

Posted on Aug 26, 2006 by Tom Fragala

Prepare for an ungodly beast to be unleashed on U.S. taxpayers. Unfortunately this is a fait accompli. The IRS is going to use collection agencies to collect back taxes. Look, getting tax revenues that are left on the table is great. But how can this be a good thing?

Reasons to be concerned:

1. Less taxes could be collected, not more. Collections make a huge commission. Now if they collect a LOT more unpaid taxes. Maybe it will pay off. Huge risk.
2. Sensitive data released. Data on thousands of taxpayers will have to be released to these agencies.
3. Loads of scams. Companies posing as legitimate collection agencies will take advantage of public knowledge that some collection agencies now do collect taxes. This is going to be a huge scam.

GuardMyCreditFile reports on one hell of a story.

Of all the bad ideas to come out of Washington within the past twelve months, this one has got to be in contention for the "dumbest" award. Beginning September 7th, the IRS will begin using private collection agencies to go after people who owe back taxes. The new policy will be a windfall for collection agencies but is likely to cost tax payers more than $80 billion in lost revenues over the course of the next ten years. At the same time, the policy is likely to lead to significant privacy breaches, scams and consumer abuses.

Under the plan which has been approved by Congress, collection agencies will make a commission of anywhere from $0.22 to $0.24 on every dollar that is collected. It is expected that agencies will make $330 million annually from the deal. According to the IRS, using private collection agencies will be significantly more expensive that using IRS employees would be. In fact, IRS employees only cost tax payers $0.03 to $0.04 for every dollar collected.