The terror behind IRS Private Debt Collections: Who is really to blame?

The terror behind IRS Private Debt Collections: Who is really to blame?

The answer? It NOT the IRS that is to blame It is Congress. We try to be fair to the IRS, and in this case, the IRS got it right. They were the ones who we more fair and humane. It is Congress that rather monstrously passed this dumb dumb dumb idea. Private debt collection is something the IRS once experimented with, but it quickly realized it was a bad idea. Between 2006 and 2009, with Congressional approval, the IRS tried on their own using private debt collectors to try to collect taxes on cases that were too small to send to revenue officers or otherwise weren’t getting worked. The IRS ended this experiment realizing there was no free money. The program created more headaches than it was worth. As the IRS learned that there was a reason why these cases were uncollectable. The people they went after were dead broke. So the IRS abandoned the idea of using third party private debt collections forever and would stick to their normal collection processes that do have some important protections available for those who are financially struggling. Legislative accounting fraud is enabled by something called PAYGO budgeting. PAYGO budgeting, which stands for “pay-as-you-go,” it is a budget rule which requires new proposed spending to be offset by tax increases or cuts in mandatory spending. What this means is that if Congress wants to spend $100 on a new spending program, it has to find $100 in cuts or in additional revenues. The purpose is to keep the budget deficit low. Yet the budget deficit continues to grow. So what’s going on? The answer is that while the spending is sure to happen, the offsets, the cuts or increases in revenue rarely occur. Yet, just because those offsets never happen, the spending is not undone. No rather, nothing is done at all. it is all swept under the rug. So how does PAYGO apply in this case? Let me explain. So in 2015, there was a new proposal — this was the FAST Act, a new spending bill. And so Congress was looking around for some offsets. So someone had the idea that if only past due IRS debts were sent to private collection, it would rain free money. About a billion dollars of unpaid taxes where there just for the taking. Free money! This claim was completely accepted as true, again even though, again, the IRS tried a limited private collection program and it completely failed. Again, it failed so bad the IRS stopped doing it. Yet the program actually cost $13 million. The IRS spent $20 million dollars so far to administer the program, but it only brought in $7 million in revenue. That is, the deficit increased by $13 million. So instead of not offsetting the spending like PAYGO demands, it actually increased the deficit. But what is even worse is when you ask yourself where did that $7 million they did collect come from? These taxpayers were deemed to be the lowest priority of IRS collections. How did these seriously strapped individuals come up with $7 million. Well the Taxpayer Advocate Service did some great research. And it found that these taxpayers, if using IRS guidelines would have been placed in a hardship status. A hardship status is where the IRS deems you to be currently not collectible. So they leave you alone, although they will intercept any refunds that you may be entitled to. Under the IRS guidelines these people would not be subject to levies or the threat of levies. Yet many of these people have been sent out for private collections! So in an effort to make themselves appear as fiscal hawks, Congress mandated that private collection agencies extract money from the most vulnerable Americans, making these suffering people more vulnerable. Look I know my firm and a lot of the other good ones would be able to get tax relief for anyone facing a financial hardship. But so many people simply don’t have the resources to pay us even if we charged half our fees. It’s only the lucky ones who have friends or family to borrow from or get a gift from that get the top representation. There are legal clinics and they are great, but there’s simply not enough of them, and they are typically bound to the school year as most of them are run out of law schools. Yet here we are, Congress authorized private debt collectors to extract money from Americans who not just below the poverty line, which for a married couple is about $16,000 per year. But, according to the Taxpayer Advocate, many of the people the government collected from made less than 2 1/2 times of the poverty line. We are talking about is people who have $5000 per year to live on. Let me know what you think and what kind of solutions you would impose. I will merely offer my observation — tar and feathers always seem to work. We just got to make sure we get the right people. And in this case, it is NOT the IRS. Parent & Parent LLP 114 South Main Street Wallingford, CT 06492 (203) 269-6699 https://youtu.be/qXESF_j5BKE IRS Medic