debt collectors to go after back taxes Unpaid Taxes Could Be Transferred to Debt Collection Agencies

If you think paying tax debts to Uncle Sam is bad enough, then you won’t like to hear what steps the Internal Revenue Service (IRS) may be required to take next.

According to a recent report by The Washington Post, “The Internal Revenue Service would be required to turn over millions of unpaid tax bills to private debt collectors under a measure before the Senate, reviving a program that has previously led to complaints of harassment and has not saved taxpayers money.”

The new tax provision is part of a bigger bill that is designed to renew a handful of soon to expire tax breaks. Sen. Charles Schumer, D-N.Y., is the man behind the recent tax request. Not surprisingly, New York happens to be where two of the four private collection agencies that are included in the bill are located.

One part of the bill “requires all ‘inactive tax receivables’ to be assigned to private debt collectors if the IRS cannot locate the person who owes the money or if IRS agents are unable to make contact within a year,” according to The Washington Post report.

Military members who are serving in combat zones, innocent spouses, and the deceased are some of the taxpayers that would be excluded from being contacted through tax notices. “But bereaved relatives could find themselves under siege for unpaid estate taxes under the proposal. So could people who incur a tax debt under the new Affordable Care Act, either because they owe a penalty for not buying health insurance or because the IRS was too generous in estimating the size of their health-care tax subsidy,” said The Washington Post.

In a recent letter to the Senate, Nina Olson, the United State’s taxpayer advocate, encouraged lawmakers to remove the proposal.

According to Olson, it is unwise to outsource the collection of federal tax debts because it unfairly affects low-income taxpayers. “Despite two attempts (in the past) at making it work, the program has lost money both times, undermining the sole rationale for its existence,” wrote Olson.

Olson also believes that if debt collectors are “seen as the public face” of Obamacare, it might make it difficult for the IRS to regulate the health-insurance program.

According to the Post, “Schumer proposed the provision, which has bipartisan support, last month during a meeting of the Senate Finance Committee.”

The provision was added to the “broader tax measure, which is expected to win Senate approval next week. It is unlikely to reach Obama’s desk quickly, however, because of a continuing dispute with the House over reviving the expired tax breaks,” wrote The Post.

Schumer believes that program could create many jobs for poor areas of his state, and according to a spokesperson, that any tax debts that were a consequence of the Affordable Care Act would not be issued to debt collection agencies.

Still, Olson does not see the point in paying 25 percent to debt collectors, when the IRS eventually gets the money the end. Even more, she believes that private debt collection has been ineffective in the past.

If you have unpaid taxes or have received a Notice of Federal Tax Lien, call tax relief attorneys at US Tax Shield. With years of experience negotiating with the IRS and State tax agencies on behalf of our clients, we have the expertize and the knowledge to help you solve your tax problems once and for all. Call us to day for your free consultation.