The House Ways and Means Committee voted along mainly party lines to repeal the ability of the Internal Revenue Service to enter into private debt collection contracts, with a vote of 23 to 18 on the Democratic-backed bill.Under current law, the IRS can use private debt collection companies to find and contact taxpayers who owe outstanding tax liabilities and arrange payment. The companies can keep up to 25 percent of the amount collected, and the IRS can retain another 25 percent for additional enforcement activities. The Tax Collection Responsibility Act of 2007 would repeal that authority, which critics fear could lead to abusive tax collection practices.
The bill contains several other provisions to make up for the estimated $1.1 billion that could be lost in tax revenue over the next 10 years. One provision would increase the penalties on failures to provide Form 1099 information returns. Another provision would temporarily increase, for three months in 2012, the required estimated tax payments for certain large corporations. Revised tax rules in the bill would also impose an immediate tax on individuals who renounce their U.S. citizenship.
To gain wider support, the bill also contained a provision that would delay for one year, to Dec. 31, 2011, the application of the 3 percent withholding requirement on government payments for goods and services.
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