Private Debt Collectors Are Targeting Taxpayers Who Can’t Afford to Pay

The IRS private debt collection program is causing harm in the United States by targeting taxpayers who cannot afford to pay and urging people with tax debt to enter into lengthy installment plans, deplete their retirements, take out second mortgages, or borrow money from family or friends. These collectors are not offering real solutions to these taxpayers. As of September 30, 2017, private debt collectors had cost the IRS $20 million and only brought in $6.7 million in delinquent taxes, making the decision a costly one as well.

Private Debt Collectors Targeting Wrong Taxpayers

Private debt collectors are targeting taxpayers who can least afford to pay. Around 19 percent of the tax payments private debt collectors collected came from people who earned median incomes of only $6,386. An additional 25 percent of targeted taxpayers had median annual incomes below $23,096.

Many of these individuals struggle to pay for basic expenses like food, shelter, clothing and medical care. Pushing these low-income people to make unaffordable tax debt payments can cause them to turn to government programs to help them cover their basic needs.

A large number of these individuals would not have been required to pay delinquent taxes if they had been working directly with the IRS. The IRS would use hardship status to declare the debt “currently not collectible,” providing these struggling individuals and families relief they need. By privatizing the debt collection process, those who need tax debt help the most are not getting it.

IRS Spending Too Much to Collect Too Little

Another problem with the privatization of tax debt collection is the cost. So far, the IRS has paid more to the private debt collectors than it received in back tax payments. By September 14, 2017, the IRS had assigned about $920 million in tax debt to private collectors. Less than 1 percent of the tax debt assigned had been recovered by that date, but about $20 million had been paid out to private debt collection agencies. While it seems that using private debt collectors would help with the $138 billion in back taxes that are owed to the government, crunching the numbers shows that this is not the most cost-effective option.

In light of these two facts, it is clear that the government needs to find a different solution for collecting back taxes.

Taylor L. Randolph

Taylor L. Randolph, the founder of Randolph Law Firm, P.C., located in Las Vegas, Nevada. He focuses his practice on bankruptcy, foreclosure prevention, and IRS tax problems. An award-winning attorney who is admitted to practice before the IRS nationwide, Taylor excels in the representation of individuals and businesses who are facing legal challenges.

Years of Experience: Nearly 20 years
Nevada Registration Status: Active

Bar & Court Admissions: Nevada State Bar Association U.S. District Court District of Nevada, 2006 U.S. Supreme Court, 2006 U.S. Tax Court, 2006