Debt Collectors get 24% of your owed Income Tax!

From USA Today via Tom Paine:

IRS sends collection agencies calling for back taxes
Posted 9/4/2006 11:43 PM ET
By Kevin McCoy, USA TODAY

Beginning this week, thousands of Americans who owe taxes to the federal government will start getting phone calls to pay up — from private collection agencies, not the IRS.

Despite congressional opposition and criticism from a federal employee union and a taxpayer advisory panel, the IRS is giving three collection agencies information on 12,500 taxpayers who owe less than $25,000 and have not disputed the debt.

The IRS has moved to reassure taxpayers about the plan, even outlining steps to guard against potential scam artists posing as private collectors.

"We are working hard to protect taxpayer privacy and taxpayer rights," IRS Commissioner Mark Everson said last month announcing the plan.

Critics argue that privatizing any part of the IRS' traditional collection role would increase the agency's costs and raise privacy issues, as well as create potential for fraud.

"We're continuing to do all we can to shine a light on this program," says Colleen Kelley, president of the National Treasury Employees Union, which represents IRS employees. "When taxpayers hear about what the government is doing, they are outraged."

The IRS national taxpayer advocate and the Taxpayer Advocacy Panel, an advisory board chosen by the IRS, have questioned parts of the plan.

The House passed a budget bill that, if approved by the Senate, could block the IRS from funding the effort. Kelley's union plans to start contacting senators when Congress reconvenes this week.

IRS officials say the plan involves smaller cases that federal agents wouldn't otherwise have time to pursue. The profit potential is large. The collection companies will keep up to 24% of what they recover. That amounts to as much as $336 million of the $1.4 billion the IRS projects the program will recover during the next decade.

The IRS chose three firms for the initial cases: The CBE Group of Waterloo, Iowa; Pioneer Credit Recovery of Arcade, N.Y.; and Linebarger Goggan Blair & Sampson, an Austin, Texas, law firm.

The IRS says taxpayers targeted by the program will receive written notification from the agency that includes the name of the collection company that will contact them. They will also get a separate letter from the firm.

Payment checks should be written to the U.S. Treasury, not to an individual or company, the IRS says.

Taxpayers with questions can call 800-829-1040.

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