Uncle Sam is a two-faced monster when it comes to tax debt (illustrated)

The federal government wants a company it fired two years ago — and sued three months ago — to take your money.

The IRS says it doesn’t have the manpower to collect long-overdue taxes. I guess they’ve got their hands full with the “routine” audit Donald Trump claims to be suffering. (They can’t even spare a moment to announce that he could legally release his returns any time he wants.)

Sort of like horsemen of the apocalypse, Uncle Sam is hiring four private debt collectors to do his dirty work:

They started this month.

That last one, Pioneer, is a company the Education Department in 2015 said provided inaccurate information to borrowers “at unacceptably high rates,” forcing the department to end its contract and issue new guidance to all the other collection agencies it works with.

Pioneer is also a subsidiary of Navient, which the CFPB sued in January for “systematically and illegally failing borrowers” and allegedly cheating them out of $4 billion. That lawsuit is ongoing.

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This time will be different?

I guess we’re operating under a “three strikes” principle here — in more ways than one.

“Twice before, in 1996 and 2006, the I.R.S. has tried to farm out some of its collection duties,” The New York Times reported yesterday. “Both times, the programs were shut down and deemed failures.”

Last time, the program cost taxpayers far more than it recouped and came with a wave of collector harassment. Pioneer and CBE were both used last time, too.

The IRS’ official Taxpayer Advocate Nina Olson, sort of an ombudsman for the agency, doesn’t like the plan

The Office of the Taxpayer Advocate and I personally were intimately involved in the development of the 2006-2009 private debt collection program. We also handled more than 3,700 cases involving taxpayers against whom private collection agencies sought to collect. Based on what I saw, I concluded the program undermined effective tax administration, jeopardized taxpayer rights protections, and did not accomplish its intended objective of raising revenue. Indeed, despite projections by the Treasury Department and the Joint Committee on Taxation that the program would raise more than $1 billion in revenue, the program ended up losing money. We have no reason to believe the result would be any different this time.

Pioneer promises to be good, though! A page on its website says you can expect “fair treatment and quality service,” in line with the Fair Debt Collection Practices Act. It also notes the process it will use to prove to consumers that when the company calls it isn’t actually a tax scammer.

Traditionally, the IRS doesn’t call taxpayers — but the fact these private collectors can will offer new cover to con artists who prefer live communication. It’s easier to scare you into paying up that way.

“The IRS will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, particularly in light of continual phone scams where callers impersonate IRS agents and request immediate payment,” the IRS acknowledges. “Private collection agencies will not ask for payment on a prepaid debit, iTunes or gift card.”

Olson says private collectors, unlike the IRS itself, can also go after taxpayers whose low income meets “economic hardship” requirements.

Why now

The IRS says private collection efforts will only target tax debt that’s so old the IRS can’t be bothered pursuing it. In total, the IRS is currently owed $138.2 billion in back taxes. It also says it won’t give private collectors accounts for taxpayers that are:

  • Deceased
  • Under the age of 18
  • In designated combat zones
  • Victims of tax-related identity theft
  • Currently under examination, litigation, criminal investigation or levy
  • Subject to pending or active offers in compromise
  • Subject to an installment agreement
  • Subject to a right of appeal
  • Classified as innocent spouse cases
  • In presidentially declared disaster areas and requesting relief from collection

So, they’re only going to give private collectors the easy stuff that’s old. But Trump jokes aside, it’s kind of weird they’re even bothering. Despite suffering cutbacks, by the IRS’ own reporting, in the past two years the agency has been more efficient at collections than in the previous 20.

In 2015 and 2016, the IRS estimates it spent $35 to recover $100. Throughout the 90s, it cost closer $50 to get back $100.

To sum up: The IRS knows this program has failed twice before. They’re actually doing a better job at recovering tax debt on their own than they have in decades. They’re using an agency that the federal government is actively suing and has ditched for doing a bad job before. And a top IRS employee involved in the last private collection effort says it’s a stupid idea that will hurt the poorest taxpayers.

Why?

I can’t even blame Trump — who wants to cut the IRS further — because this has been planned since the end of 2015. It’s all on a clueless Congress.

And it would be easy to chalk this up to Republicans reversing the course set by Obama, as they’re doing on so many other things. But sadly, this is a bipartisan bit of stupidity.

Senate Minority Leader Chuck Schumer, a Democrat from New York, put out a press release touting the 300 jobs Pioneer was adding to his state because he pushed for them to get an IRS contract.

“Senator Schumer is a friend to Navient, Pioneer and all our employees and their families,” Navient CEO Jack Remondi said in Schumer’s release. “We are excited that, thanks to his leadership, Navient has the ability to grow and add good jobs. We are grateful to have Senator Schumer fighting for us.”

Yeah, thanks, Chuck.

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Article last modified on August 8, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Want to Collect Debts for the IRS? The Bar Is Pretty Low - AMP.

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Article last modified on August 8, 2017. Published by Debt.com, LLC .

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