The numbers can be a bit jarring. According to an article in Accounting Today, there are nearly 19 million Americans who are in arrears on their federal income taxes. Their tax bill totals more than $400 billion. Four million people are making payments in installments to the Internal Revenue Service and the IRS is after another 7 million people to make their payments.
No matter how you add those figures up, it amounts to an IRS that feels overwhelmed by width and depth of its tax collection duties. To address the problem, Congress and the president last year created a law that requires the IRS to hire private debt collectors to go after the money it is owed.
This is not the first time the IRS has been ordered to use private collectors. Twenty years ago a similar effort was launched — and abandoned after little more than a year. The second attempt lasted longer (from 2006 to 2009), but likewise came to an end.
According to Accounting Today, the 1996 effort brought in $3 million, but cost more than $1 million. The second try raked in $98 million at a cost of $47 million.
The publication notes that in those two failed attempts, critics voiced concerns that the private debt collectors sometimes failed to explain to taxpayers their available payment options that included installment plans and penalty mitigation for unpaid taxes.
And let’s face it, many taxpayers were worried that these private debt collectors, which were businesses, might make commercial use of the tax data they had at their fingertips.
Eventually, officials killed off both efforts out of concerns that they were not cost-effective and that taxpayer rights and privacy were not sufficiently respected by the collectors.
That brings us to another attempt by the federal government to use private collectors. Accounting Today notes that technology has changed information security since 2009, a mere 7 years ago. Taxpayers across the nation are wary of the well-publicized phone scams in which fake collectors try to scare people into paying “taxes.”
Will that heightened awareness of fraud doom collection efforts? We will be very interested observers of this third effort. If you are facing back taxes or any other criminal tax matter, the tax lawyers at Robert J. Fedor, Esq. can help!