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Archive for Thursday, September 7, 2006

IRS tax collection will have hefty tab

September 7, 2006

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I'm beginning to wonder if some extraterrestrial has removed the common sense of the people we send to represent us in Washington.

Take, for example, the latest nonsensical measure to come out of Congress: The IRS, under a project authorized through the 2004 American Jobs Creation Act to collect delinquent tax bills, has been forced to hire private collection agencies to do a job the agency could do for much less.

Our government is willing to pay private debt collectors between 21 cents and 24 cents per dollar collected, instead of paying the 3 cents it would cost to have IRS employees do the job, says Colleen Kelley, president the National Treasury Employees Union.

Over the course of 10 years, the IRS expects the private firms to help it collect an additional $1.4 billion in outstanding taxes.

The three companies initially participating in this first phase of the collection program are the CBE Group Inc. of Waterloo, Iowa; Linebarger Goggan Blair & Sampson LLP, based in Austin, Texas; and Pioneer Credit Recovery Inc. of Arcade, N.Y. More firms will be added later.

If you know you owe back taxes, take care not to be fooled by fake collectors. Some guidelines:

¢ The private agencies can't claim they have power to take enforcement actions such as filing liens, or making levies or property seizures.

¢ Collection company employees are not permitted to call or write any third party, such as your employer, bank or neighbors, to ask about your financial condition.

¢ Employees are allowed to speak to your spouse, or leave a message on an answering machine, for purposes of trying to contact you by telephone. However, once the collection company knows how to reach you directly, it can't continue contacting third parties.

If you're going to be contacted by one of these private collection firms, you will get written notice from the IRS first. The name of the company will be included in the letter. The mailing will explain that a taxpayer may request in writing to work with the IRS instead of with the private company. (For a sample of such a letter go to www.irswatch.org.) A second letter will come from the collection firm.

When paying a collection agency, the check should be made out to the U.S. Treasury. Do not make it out to an individual or firm.

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