Will the IRS Bring Back Private Debt Collections?

Somebody has sneaked some terrible legislation into a provision of the EXPIRE Act which, if approved, would require the IRS to hire outside private debt collection (PDC) firms to collect past due taxes.  If this sounds familiar it is because the IRS has already tried this a couple times with very little success.  These are just some of the problems that tax practitioners have identified with hiring private debt collectors to collect income taxes:

  • The IRS must hand over sensitive taxpayer information (like social security numbers) which raises concerns about privacy and identity theft.  Just like a juicy bit of gossip, the more people you tell, the greater the risk of the information spreading to the wrong people or groups.  No amount of training can ensure this won’t happen.
  • If private collection agencies are hired on a contingency basis, their motivation to collect may be higher than your average IRS employee who is paid the same regardless of how much revenue is collected.
  • Although private collection agencies would be given access to some key pieces of information, not all tax account information would be available.  This means that the taxpayer would be required to go back to the IRS anyway, to confirm what the PDC firm has done and tie up any loose ends.

I definitely saw this in my practice during the second trial run of this program 6-7 years ago.  The PDC firms were not given authority to enter into certain installment agreements, so we would have to get cases transferred back to the IRS in most cases.  Using private collection firms only complicates things at the IRS and creates bottlenecks at an agency that is already known for being a little slow.  The good thing is that many, if not most, stakeholders and authorities oppose this legislation, including the National Conference of CPA Practitioners (NCCPAP), the Taxpayer Advocate, the IRS Oversight Board, and the Commissioner himself.

Only federal employees, who have been screened and vetted through the Internal Revenue Service, should be permitted to represent the federal government in matters pertaining to individual taxes.

~ Steven Mankowski, NCCPAP Tax Policy Committee chair

NJ No Longer “Film Friendly”

Movie and television producers are going to realize, if they don’t know already, that they won’t find maximum tax relief by setting up shop in New Jersey.

You probably heard about New Jersey’s governor, Chris Christie’s denial of a $420,000 tax credit for MTV’s Jersey Shore earlier this year. Christie doesn’t approve of the show because it “perpetuates misconceptions about the state and its citizens.” It’s probably safe to say that most people from NJ would prefer out-of-staters soon forget the association with Jersey Shore.

However, democrats continue to push for passage of legislation that would grant tax credits for production companies that shoot films and TV shows in the Garden State. The democrats point to a 2008 study showing that movie maker tax credits are good for jobs and good for the local economy in general. The republicans point to a 2010 study showing that movie production incentives have no such effect.

The irony in all this is that New Jersey, specifically Fort Lee NJ, is known as the birthplace of the motion picture industry. The state suffered its first hit 100 years ago when most filmmakers moved their operations to California where they could film year-round with little threat of inclement weather. Could these tax issues be the second major setback for New Jersey’s film industry?