In 2017 IRS paid private debt collection Agencies approximately $20 million while these forms collected only $6.7 million. During this whole transaction, IRS lost approximately $13 million. The whole process was a big failure not only because of the losses that the government faced but due to various other reasons.
The US today reported that the taxpayer owes $400 billion dollars to the IRS but the New York Time reported that it was just 138 billion dollars. In spite of all this amount, the program was not expected to collect even close to the original amount.
In spite of all these controversies, IRS still prefer to stick with the program.
The program targeted people from the low-income group
It was also told that the private debt collectors were collecting an enormous amount of money from the people who cannot afford to pay. From the total number of taxpayers 19% of the people on below the federal poverty line. The menu of the people who paid to 20 private debt collectors was below the poverty line and many of the world living off social security benefits. Although IRS states that they owe a lot of amount to the public but what is the benefit of paying tax if the people are not able to afford food and shelter.
All this case is because of the private debt collectors. If this responsibility was handled by IRS itself then the current taxpayers would be declared as “currently not collectible”. This means that the people falling below the poverty line would not be liable to pay any taxes. The total amount paid to the private debt collectors was 20 million dollars and approximately 1 million dollars was the commission of the tax collectors.
The senators also came to know that these private debt collector companies force the people to take out second mortgages or use their credit cards in order to pay that debt. And when the taxpayers were not able to pay the debt they were told to borrow the money from their friends or family. No other income tax collection companies follow these tactics in order to collect the debt. These private debt collection companies also set up the taxpayers on a 7-year installment plan. Although according to the guidelines of IRS the tax collectors are not allowed to arrange any agreement lasting more than 5 years.
This program handled by IRS is not showing any progress. IRS has tried this approach of collecting the Tax Dept in 1996 and 2006 as well. And both the time the program resulted in a huge loss to the IRS. So, in order to protect the people of your country from starving and protecting their rights, IRS should stop testing this type of programs which caused a huge loss to the government and put a lot of pressure on the taxpayers. There are many cases of taxpayers being harassed by the debt collector companies. Keeping all these things in mind using private debt collector companies for collecting the debt must be stopped.