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Stop it, stop it right now!

September 13, 2006

That’s the order from a group of  U.S. Senators to the IRS regarding the agency’s use of private debt collectors to bring in unpaid tax money.

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Senators Byron Dorgan (D-North Dakota) and Patty Murray (D-Washington) yesterday introduced S. 3887, which, if it becomes law, would halt the privatization effort.

Such a reaction is not a big surprise. This bill was a definite possibility that I mentioned last week when this questionable collection process began. Many lawmakers agree with tax experts and consumer advocates that this is not a good idea, for several reasons:

  • An earlier attempt in the 1990s failed.
  • The bill collection industry has a terrible record and worse reputation when it comes to dealing with "customers."
  • And to top it all off, the whole process is fiscally inefficient, some would even say irresponsible.

The House has already zeroed out funding for future private tax debt collection. That position is likely to prevail when the House-Senate budget negotiations get underway. The Dorgan-Murray bill would go a step further and stop the currently allowed collections.

"This bill tells the IRS to cease and desist from having private companies harass taxpayers," Murray said in a press release announcing the bill’s introduction. "While all taxpayers must pay their debts to the Government, every taxpayer should also the right to work directly with the IRS over a disputed tax bill. The IRS has a dismal record of protecting taxpayers’ privacy, especially when it involves agency contractors."

Dorgan reiterated that sentiment: "[T]axpayers expect the IRS to protect confidential taxpayer information, and that they will not be subjected to abusive debt collection practices. The failed experience the IRS had the last time it tried to use private debt collectors makes clear [that] taxpayers can have little confidence that either of those expectations will be met."

The bottom line on private debt collection, according to Dorgan:

"It’s a bad idea any way you look at it."

Joining Dorgan and Murray as S. 3887 cosponsors are Senators Barbara Mikulski of Maryland, Patrick Leahy of Vermont, Diane Feinstein of California, Daniel Akaka of Hawaii, John Kerry of Massachusetts, Ted Kennedy of Massachusetts, Joseph Lieberman of Connecticut and Frank Lautenberg of New Jersey.

While all the official supporters of this Senate bill are Democrats, you can bet that there also are plenty of Republicans who don’t want their taxpaying constituents harassed by bill collectors. Just look at the GOP-controlled House; Representatives voted 406-to-22 to eliminate money for future private tax debt collection programs.

No word yet on what the White House thinks about the tax bill collection program or efforts to squash it, but I suspect that if Dubya made this his second presidential veto, he’d find his popularity rating on Capitol Hill even lower than it is across the rest of the country.

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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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