The National Conference of CPA Practitioners is questioning a proposal to reinstate a discontinued program that would allow private contractors to collect unpaid tax debts on behalf of the Internal Revenue Service.

A provision inserted in the Senate version of the tax extenders legislation, the EXPIRE Act, would authorize the IRS to reinstate the privatization program, which was discontinued in 2009 after it was shown to bring in less revenue than promised while jeopardizing taxpayer rights. The IRS Oversight Board, the National Taxpayer Advocate and IRS commissioner John Koskinen have also opposed bringing back the program (see IRS Oversight Board Opposes Private Debt Collectors).

The National Conference of CPA Practitioners is now joining them in opposing the provision of the EXPIRE Act that would require the IRS to hire collection agencies to act on the IRS’s behalf. 

In response to this section of the bill, NCCPAP Tax Policy Committee chair Steven Mankowski said, “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.”

The NCCPAP supports the overall tax extenders legislation with the exception of the provision for private debt collection, but the group believes there are many challenges that accompany allowing collection agencies access to an individual’s Social Security numbers and other personal identification information which must be provided to the agency in addition to their tax debt information. 

“Not only can privacy be compromised but if this bill becomes a law, it puts the taxpayer at a greater risk for identity theft,” said Mankowski. “It gets more complicated because when you hire collection agencies on a contingency basis, as is proposed in this bill, the collection agencies are motivated to do what it takes to get paid, including reporting delinquent taxpayers to credit bureaus if the taxpayers do not respond to the collection agency within that agency’s allotted timeframe.” 

Another NCCPAP official pointed to further complications that could arise with private tax debt collectors. “Even what is considered delinquent can be confusing,” said NCCPAP president Ed Caine. “The IRS sends out letters to taxpayers who potentially underpaid their taxes, but this only occurs 12 to 15 months after that particular tax return was filed. By the time a taxpayer learns that an issue needs to be addressed, it is technically already at least a year late. A taxpayer’s delinquent status is just one of many potential situations in which something could fall through the cracks if the bill passes and Congress forces the IRS to coordinate with outside collection agencies.” 

Caine and Mankowski are both CPAs from Pennsylvania, a state that has implemented a system similar to that which is proposed in Section 304 of the EXPIRE Act, which was inserted by Sen. Charles Schumer, D-N.Y., whose state contains two of the private firms that were approved as contractors by the IRS when the private debt collection program was in force. Caine and Mankowski said they have seen from their clients the pitfalls that can occur when the government hires collection agencies to collect past due tax debts.

Mankowski also questioned whether the program would truly save the IRS money or be effective. He cited the two other periods when the IRS has attempted similar programs that have been unsuccessful. Since the collection agencies will be given only basic information, taxpayers still need to go back to the IRS for further clarification to check whether or not the error is in fact valid, he noted. 

Sanford Zinman, the former chair of NCCPAP’s Tax Policy Committee, explained it this way, “Although SEC. 304 attempts to limit collection issues to certain inactive tax receivables, there may still be open issues that a taxpayer considers unresolved. Forcing a taxpayer to communicate with a collection agent while actively trying to resolve a tax discrepancy with the IRS not only slows the collection process, but punishes the taxpayer who is trying to work things out with the IRS.”