House Votes to End Private Tax Debt Collection

by Leroy Baker, Tax-News.com, New York

16 April 2008

The House of Representatives on 15th April voted to abolish the Internal Revenue Service's private tax debt collection program, as part of a bill which proposes to tackle identity theft, simplify tax preparation, and improve services provided to taxpayers generally.

Commenting on the Taxpayer Assistance and Simplification Act of 2008 (HR 5719), which passed the House by a vote of 238 to 179, Ways and Means Chairman Charles Rangel (D-NY) argued that: “As millions of people finish their tax returns, file and pay their taxes, the bill before us makes our Federal tax system fairer."

“Both sides of the aisle have taken the lead on provisions contained in this bill, which responds to recommendations made by the Taxpayer Advocate," he added.

The legislation, introduced by Rangel and Oversight Subcommittee Chairman John Lewis (D-GA), modernizes Internal Revenue Service functions to provide protections to taxpayers and improve outreach.

Additionally, the bill repeals the IRS Private Debt Collector program, labelled by Rangel as "an imprudent outsourcing of an inherent government function that to date has spent USD75mn to collect just USD35mn."

“It would once and for all repeal the authority of the IRS to enter into private debt collection contracts,” Lewis continued, arguing that: “This program violates the public trust and must end.”

The Taxpayer Assistance and Simplification Act of 2008 is the result of hearings conducted by the Oversight Subcommittee.

The provisions included in HR 5719, as agreed to by the Committee, would:

• Eliminate the special requirements for individuals to keep detailed records of calls made on employer-provided cell phones.
• Delay for one year the imposition of a three-percent withholding requirement on government payments for goods and services made after 31st December, 2010.
• Stop federal contractors from using foreign subsidiaries to evade Social Security and other employment taxes.
• Make the administrators of state and local government programs liable for paying the employment taxes on amounts paid by government programs to in-home care workers provided to elderly and disabled persons.
• Repeal the IRS’s authority to use private debt collection companies to collect Federal taxes.
• Prohibit the misuse of Department of the Treasury names and symbols in misleading websites and "phishing" schemes.
• Protect low-income taxpayers by prohibiting IRS debt indicators for predatory refund anticipation loans, allowing IRS employees to refer taxpayers to qualified low-income taxpayer clinics, and authorizing funding for Volunteer Income Tax Assistance (VITA) programs.
• Require the IRS to notify taxpayers if it suspects theft of a taxpayer`s identity.

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