Tax Debt

Tax debt in the United States is estimated by the IRS or Internal Revenue Service at $112 billion dollars and growing due to inadequate staffing to work on the collections of that debt. They are no laughing matter because when an individual has this problem and any type of collateral, the collateral can be forced to be liquidated in order to pay the bill. Recently the IRS has been given the ability to hire private collectors as part of the American Jobs Creation Act of 2004. Private tax collectors can keep as a commission 25% of any tax debts that are collected.

Many believe that outsourcing the collection to be a bad idea. Some collectors are very abusive, deceptive and use illegal means in order to attempt to collect. The FTC or Federal Trade commission received 34,543 complaints from consumers about collectors last year. That number is expected to rise. Unacceptable tax debt collection techniques include; calling all hours of the day and night, using obscene abusive language, calling borrowers at work, threatening jail time or other actions the collector can't legally take, and revealing alleged tax debts to a third party including employers, parents, children, friends, and neighbors.

Another reason why outsourcing is not as effective as the IRS utilizing their own collections department is the fact that the IRS has more legal right to collect in ways that private collectors do not. The IRS can garnish wages, private tax debt collectors can't. The IRS can also retain a portion or an individual's entire federal tax refund, tax debt collectors can't. The IRS has the right to demand the sale of collateral, such as homes, cars, and boats and the option to remove money directly from bank accounts. If an individual finds themselves in the midst of tax debts, it is advised to seek professional help as soon as possible. In the Bible, Romans 13:8 says "Owe no man anything", this includes taxes.

Collecting these funds are a fundamental function of government and it has been noted that outsourcing this function to private tax collectors reacts badly with the IRS's already negatively perceived reputation. For example: California referred over $2 Billion dollars to private collection companies in the past, only $50 Million dollars or less than 3% was recovered. The state of California paid $5.5 Million dollars as commissions to collectors plus additional administration expenses. This does not seem an effective way for the United States government to collect from the public.c

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