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Private tax debt collection, tax-related passport restrictions are part of transportation bill baggage

December 4, 2015

Private debt collectors are back in the tax bill business, essentially chauffeured in as part of the new highway funding bill.

Money_debt_collectionClick image to read how federal agencies recently shut down four debt collectors for abusive practices. Now private bill collectors will soon be back in the tax debt collection business.

In addition, some U.S. passport holders will find that their international travel documents have been pulled, or they can't get or renew them, because they owe $50,000 or more to the Internal Revenue Service.

These two provisions are part of H.R. 22, the Fixing America's Surface Transportation Act (FAST), that Congress passed on Dec. 3. The House vote was 359 to 65; it was 83 to 16 in the Senate. The president is expected to sign signed the legislation into law on Dec. 4.

The FAST Act provides $305 billion for road, rail, waterway, freight and infrastructure projects, over five years. That's the longest term of any transportation measure in 17 years.

Part of the money will come from requiring the IRS to use private bill collectors to bring in certain overdue federal tax amounts. This is estimated to raise $2.4 billion over 10 years.

The passport provision is projected to bring in $398 million over 10 years.

Those who objected to both provisions say the cost to affected individuals will be even greater.

Debt collectors return: Under the new highway bill, the IRS must contract with private debt collection agencies on accounts that have been designated as inactive because the agency has determined it doesn't have the resources to pursue them or because they are too old.

Some tax accounts would excepted form the debt collector law: those being paid by installment agreements, are under litigation, where the taxpayer is deceased or under 18 years old, or where a spouse is seeking relief from a tax position taken by his/her husband/wife.

Opponents of the bill collector provisions pointed point to previously failed efforts in this area. The IRS first used private collection agencies in 2006, but abandoned the program in 2009, due in part to taxpayer complaints about the collectors' aggressive tactics.

"The third time won't be the charm," said Tony Reardon, president of the National Treasury Employees Union (which represents IRS employees), of the new private collection requirements. "Reviving the experiment again will deliver the same disastrous results."

However, lawmakers who agree with Reardon weren't able to convince their colleagues to strike the provision.

Passport problems: Similarly, the transportation bill provision permitting the State Department to revoke passports of individuals with delinquent taxes of more than $50,000 also went largely unopposed on Capitol Hill.

This revocation ability generally would apply in cases where a taxpayer is subject to a lien, or notice that a tax debt is owed, or the next step, a levy, which gives the IRS authority to seize assets.

Passports would be safe in cases where a taxpayer is working to pay the debt, for example, by establishing a tax installment payment plan, or is fighting the bill via IRS appeals or in court.

The IRS will certify the identity of persons whose tax debt falls under the passport revocation parameters and pass that information along to the State Department for action. This new IRS account review concerns some, such as the conservative Heritage Foundation, which opposed "further empowering the IRS to harass and inconvenience American citizens, especially those living abroad," particularly in light of the agency's "targeting of specific nonprofit groups and myriad other abuses."

Groups who represent U.S. citizens living abroad also say the provision could cause problems since those Americans rely on their passports for more than just travel.

As these two new (or renewed in the case of private debt collectors) provisions are implemented, we can be sure that their opponents will be closely watching for problems.

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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