IRS Tries Private Debt Collectors – Again. Abuses Abound – Again

Refusing to Learn from Past Experiences

Debt collection firms use harsh and abusive practices.  They hire those so desperate for work that they have no hesitation to using false, unfair or just plain coercion to wring funds from people who just cannot pay (which is why they haven’t).  Twice before now the IRS has tried this, and this time it isn’t working any better than in the past.

The I.R.S. is owed about $138 billion, a sum that lawmakers are eager to reduce. To supplement the agency’s collection efforts, Congress ordered it to hire outside firms — an approach that was tried twice before, in 1996 and in 2006, and then abandoned because of cost overruns and concerns about abuses. Lawmakers hope the new program, which began this year, will yield better results; the congressional Joint Committee on Taxation estimated that it could net $2.4 billion over the next 10 years.

So how is the program working?

The call scripts those agencies are using — obtained by a group of Democratic senators and reviewed by The New York Times — shed light on how the tax agency’s new fleet of private debt collectors extract payments from debtors. On Friday, those senators sent a letter to Pioneer, the I.R.S. and the Treasury Department accusing Pioneer of acting in “clear violation” of the tax code.

In particular, they object to Pioneer’s “extraordinarily dangerous” suggestion that debtors use 401(k) funds, home loans and credit cards to pay off their overdue taxes.

Now if the government wants to get more money the best thing it could do is hire more examiners and examine more tax returns from the wealthy.  But that would mean more government spending and despite the fact that each dollar spent on compliance returns many more dollars in tax revenue no conservatives want to go that route.  It makes too much sense.