IRS to Reconsider Outsourcing Tax Debt Collection

A bill recently passed by the Senate taxwriters includes a provision that would revive and expand the use of private debt collectors, requiring the service to hand over to private firms nearly all the inactive tax receivables. The way the bill reads, that would include unpaid fines for not having health coverage, a penalty that IRS can only collect only by offsetting the delinquent person’s tax refund.

This provision faces long odds. Critics, such as the IRS Taxpayer Advocate, point out that a similar private tax debt collection program for 2006-2009 lost money and did a more limited one in the 1990s. They are sure to note that while there ARE penalties for IRS employees who are abusive to taxpayers, these rules do not apply to private tax collectors and firms. They might strong arm you.