Currently, the main party that a taxpayer who owes a federal tax debt has to deal with is the Internal Revenue Service. However, it is possible that in the not too distant future, such taxpayers could end up facing dealing with a different sort of party: private debt collectors.
This is due to a provision that is in the highway funding bill that the U.S. House recently passed. The provision would have the IRS use private debt collectors in the collection of tax debt.
There have been some federal tax debt collection outsourcing efforts in the past, but they haven’t stuck.
Now that the House passed its highway bill, it and the Senate will work to come up with a combined highway bill (the Senate previously passed its own highway bill). One wonders if the private tax debt collection provision will end up in the combined bill. If the provision does get included in the combined bill and that combined bill passes into law, it is likely there would be some big changes in what federal tax debt collection would look like.
What sorts of parties are involved in tax debt collection and what sorts of methods are used in such collection can have very significant impacts on both the federal government and individual taxpayers. Thus, laws that make changes regarding federal tax debt collection can have some pretty big implications.
Critics of outsourcing federal tax collection efforts to private debt collectors argue that such outsourcing could expose taxpayers to debt collection abuses, could confuse taxpayers and might not be terribly effective in increasing federal tax revenue.
If the federal tax debt outsourcing provision of the highway bill does ultimately get passed into law, what impacts do you think it would have on taxpayers? How do you think it would change the overall tax debt collection picture here in the U.S.?
Source: Accounting Today, “Highway Bill Would Revive Private Collection of Tax Debts,” Michael Cohn, Nov. 5, 2015