Author Topic: Taxpayers Advocate Report - IRS CAs disproportionately dun the poor  (Read 553 times)

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Flyingifr

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As many of you may know, Congress gave the IRS authority to have private Collection Agencies dun delinquent taxpayers. This is the second time IRS is doing this. The last time I collected $1,000 from one of the IRS CAs because the CA did not know the difference between the taxpayer's Representative and the Taxpayer him/herself. It took a $1,000 class at the Flyingifr School of Bill Collector Education to instill this critical piece of information in their minds.

Well.... the Taxpayer Advocate has issues the first report to Congress on how this new iteration of CAs doing the government's dunning. It seems the IRS is turning over to the CAs cases where the taxpayers are relatively poor. More than half have incomes below 250 percent of the federal poverty level and more than a fifth have incomes below the federal poverty level.

Here's a link to the report: https://taxpayeradvocate.irs.gov/2018ObjectivesReport
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Debtors Exams are the perfect place for us Senior Citizens to show off our recently acquired Alzheimers.

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Bruno the JDB Killer

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What percentage of the defaulted account holders are millionaires? Stands to reason poor people would be more likely to default, thus more of them being in collection.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

BrokeBob

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There are claims by some experts that in the current political climate (money talks), the IRS tends to avoid bothering wealthier taxpayers and tends to go after poorer taxpayers.  I have no idea if the government has been using enforcement powers selectively to protect people who may contribute more $ to campaigns or not. 

Bruno's suggestion that poorer people are more likely to default on tax agreements is also a very logical possibility. 

Any mathematician could tell you that if there exists more than one possibility, then every solution is a linear combination of all the possibilities.   Translated to English, it means if there is more than one possibility, then the reality could be some of each possibility. 

WonderinginWI

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This new policy is disturbing, not only because of the phenomena described.

The article did not provide the data necessary to determine whether the high percentage of low income persons affected is a function of the poor more likely to owe (as per Bruno)) or something attributable to that and/or other factors (per BrokeBob). What is clear is that the use of CAs leaves taxpayers (or tax-owers) vulnerable to the methods and tactics of those collection agencies- and we all know what upstanding, ethical and transparent entities they tend to be. Add to that the fact that those CAs have been given authority to use SS#s as an option to confirm identity and there you have a ready and waiting business model for some Russian mobster or Nigerian prince.

Furthermore, collected taxes in these situations are not remitted to the US Treasury in full- but instead, the CA gets 25% of what is collected, as does the IRS, leaving just half for you and me. This seems like an extraordinarily bad deal for everyone except the CAs and the IRS. 

Flyingifr

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Some history here: Over the past 10-15 years the IRS has been under greater and greater pressure to root out fraud in two particular areas - Earned Income Tax Credit and Child Tax Credits. This additional attention was not caused by a simple "mood of Congress" - it was written into law. Both of these credits are heavily weighted in their effect on lower incomes. No such Congressional attention has been directed at Passive Losses, Capital Loss Carryforwards, Net Operating Losses or anything else that is the typical tax situation of more affluent people. As a result of this, a disproportionate amount of IRS resources have been directed at the poor. There is nothing new about this except for the recognition that it affects a certain type of person.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Debtors Exams are the perfect place for us Senior Citizens to show off our recently acquired Alzheimers.

Founder of the Credit Terrorist Training Camp (Debtorboards)

CleaningUp

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Furthermore, collected taxes in these situations are not remitted to the US Treasury in full- but instead, the CA gets 25% of what is collected, as does the IRS, leaving just half for you and me. This seems like an extraordinarily bad deal for everyone except the CAs and the IRS.
 

Do you really believe that the collectors would be doing this for free?

Let's add one more factor to the "missing information" that might be needed to make a reasonable judgement...What are the reasons why people are not paying their taxes?  Lying on their tax returns?  Not taking enough in deductions to cover the taxes owed?  Being so impoverished that paying taxes is not an option..this is a loaded question since if they are earning enough to pay taxes and don't have the money to pay for them, there is a legitimate question as to where all the money went.

Two points that I think are appropriate here:   

    - There is no constitutional right to smoke or shoot away your assets in lieu of paying taxes, and
    -  here is no constitutional right to having the latest smart phone with an unlimited data plan or having the super-premium cable TV package.



A question for you, FlyingIFR:  In your travels as a tax accountant, have you run across the dollar amounts that are suspected/estimated for fraud in the lower income levels and the affluent as groups?  And wouldn't fraud in the middle income ranges be more prevalent since there is a far bigger segment of the populations that are neither "poor" or "affluent"?





« Last Edit: July 13, 2017 11:54:04 PM by CleaningUp »

WonderinginWI

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Quote
Two points that I think are appropriate here:   

    - There is no constitutional right to smoke or shoot away your assets in lieu of paying taxes, and
    -  here is no constitutional right to having the latest smart phone with an unlimited data plan or having the super-premium cable TV package.

I find those statements offensive and won't say anything further to avoid violating site policy by delving into the political.  I respectfully suggest you read the report.  It breaks down the yearly incomes of those affected by this new collection strategy. Of the almost 6,000 people chosen by the IRS to have their debts handled by the CAs, about 20% had incomes of less than $10,000. Half had incomes of $30,000 or less. Only 45 persons had incomes equal to or greater than 250% of the poverty level. Almost 1,500 of those people were on either SS retirement or SSI with incomes of less than $13,000 and $10,000 respectfully.

Quote
  Let's add one more factor to the "missing information" that might be needed to make a reasonable judgement...What are the reasons why people are not paying their taxes?  Lying on their tax returns?  Not taking enough in deductions to cover the taxes owed?  Being so impoverished that paying taxes is not an option..this is a loaded question since if they are earning enough to pay taxes and don't have the money to pay for them, there is a legitimate question as to where all the money went.   

The "loaded question" you propose - the allegation that anyone who makes enough money to be assessed an income tax that they cannot afford to pay must have squandered those dollars on illicit activities or luxuries doesn't square with the realities of living below the poverty level. My personal suspicion (non verified) is that the tax debtor most likely to fall into the categories alleged is likely the high-flyer- the affluent person referenced in Flyingifr's post.

Per the "lying on their tax returns?" comment:  Most of the tax debts channeled into this new collection method were determined via "self-report," rather than IRS audit, investigation or court action. This leaves open the possibility that the amounts are not even correct.

And finally, per the report, the collection methods previously employed by the IRS (and currently employed for those not selected for CA collection) appear to be successful. I don't think anyone (myself included) is suggesting that taxes should be optional. If you owe them, you should pay them if at all possible. That said, the choice to bring in a third party (outsourcing, anyone?) at a significant cost and not insignificant risk to those debtors seems problematic.

CleaningUp

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You are reading into my post far more than what I said.

The reason that I made the statements that I did is to get you to think about the priorities of those that are delinquent and to consider whether or not in terms of the stress being imposed that some if it may be self-inflicted.

As for the "report", I doubt seriously if the statistics that YOU have quoted have anything to say about the larger set of income tax evaders/avoiders that were NOT subject to collection agency referral.

But then again, since you weren't reading what I wrote for what it said, you came to a conclusion, and commented based on that conclusion, that bore little relation to the questions asked.

Perhaps you should seek medical advice on the penchant of your knee moving abruptly without obvious cause?

Flyingifr

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Do you really believe that the collectors would be doing this for free?

Let's add one more factor to the "missing information" that might be needed to make a reasonable judgement...What are the reasons why people are not paying their taxes?  Lying on their tax returns?  Not taking enough in deductions to cover the taxes owed?  Being so impoverished that paying taxes is not an option..this is a loaded question since if they are earning enough to pay taxes and don't have the money to pay for them, there is a legitimate question as to where all the money went.

The reasons for owing the taxes? All of the above and a couple of dozen more.

Quote
Two points that I think are appropriate here:   

    - There is no constitutional right to smoke or shoot away your assets in lieu of paying taxes, and
    -  here is no constitutional right to having the latest smart phone with an unlimited data plan or having the super-premium cable TV package.



A question for you, FlyingIFR:  In your travels as a tax accountant, have you run across the dollar amounts that are suspected/estimated for fraud in the lower income levels and the affluent as groups?  And wouldn't fraud in the middle income ranges be more prevalent since there is a far bigger segment of the populations that are neither "poor" or "affluent"?

You are making a common error - that a badge of Tax Fraud is owing money to the Government. That is patently false. Fraud is an illegal attempt to evade taxes through actual actions. Owing money, even owing taxes, is a civil issue. Income level is irrelevant in the owing of taxes, but it is VERY relevant in Tax Fraud. In my 35 years, owing money to the Government tends to be a problem in the middle class and poor - the wealthy generally have the resources to deal with a tax debt before it becomes public record (a tax lien). Of course, there are exceptions to that, and those exceptions often make the newspapers in  the case of the wealthy and famous. For the middle class and poor, their tax issues seldom if ever make the newspapers, but there are a lot more of them in numbers, hence the hiring of the collection agencies. The wealthy tend to have more dollars owed in taxes, but the poor have a harder time coming up with those numbers to make payment. The alternatives to payment that the IRS and most States have (Offer in Compromise, Currently Not Collectable,  Full or Partial Pay Installment Agreements) are heavily weighted to be eligible to the middle class and poor.
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Debtors Exams are the perfect place for us Senior Citizens to show off our recently acquired Alzheimers.

Founder of the Credit Terrorist Training Camp (Debtorboards)

WonderinginWI

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Quote
You are reading into my post far more than what I said.

The reason that I made the statements that I did is to get you to think about the priorities of those that are delinquent and to consider whether or not in terms of the stress being imposed that some if it may be self-inflicted.

I don't believe I am "reading" anything into your post. I was simply commenting on what you wrote.

The article upon which this thread was premised contained, among many things, data showing that the majority of persons whose debts were chosen for the new CA method of collection had very low incomes. Other issues presented included the efficacy of previous IRS collection methods and the myriad possible problems associated with introducing private collection agencies into the mix. There was, however, nothing contained in the article attempting to pass judgement upon those tax debtors--nothing explaining that had they simply been responsible and of good moral character, they would certainly have paid their taxes. That judgement was passed by you.


CleaningUp

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Re: Taxpayers Advocate Report - IRS CAs disproportionately dun the poor
« Reply #10 on: July 15, 2017 08:45:17 PM »
But it did not contain the type of data that I asked FlyingIFR to comment on.

Flyingifr

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Re: Taxpayers Advocate Report - IRS CAs disproportionately dun the poor
« Reply #11 on: July 16, 2017 06:36:09 PM »
But it did not contain the type of data that I asked FlyingIFR to comment on.

I thought I did comment. If not, maybe I didn't understand the question. Could you re-state it?
BTW-the Flyingifr Method does work. (quoted from Hannah on Infinite Credit, September 19, 2006)

I think of a telephone as a Debt Collector's crowbar. With such a device it is possible to pry one's mouth open wide enough to allow the insertion of a foot or two.

Debtors Exams are the perfect place for us Senior Citizens to show off our recently acquired Alzheimers.

Founder of the Credit Terrorist Training Camp (Debtorboards)

CleaningUp

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Re: Taxpayers Advocate Report - IRS CAs disproportionately dun the poor
« Reply #12 on: July 17, 2017 02:05:45 AM »
You clarified what I was looking for in your second post...Does the industry have an estimates of just how much is owed?  Is there a breakdown that would indicate the amounts that may be owed by the "middle class" or "the poor, and the number of households in each category?

 

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