IRS Assistance for Taxpayers Experiencing Economic Difficulties

2/26/2009

House Ways and Means Subcommittee on Oversight

Chairman Lewis, Ranking Member Boustany, and distinguished members of the Subcommittee, I would like to thank you for allowing me to provide comments on IRS assistance for taxpayers experiencing economic difficulties. As President of the National Treasury Employees Union (NTEU), I have the honor of representing over 150,000 federal workers in 31 agencies, including the men and women at the IRS.

Mr. Chairman, NTEU believes that in the current economic climate, it is more important than ever that taxpayers be able to deal with the IRS directly to work through any financial difficulties they may encounter. IRS employees have a wide range of tools and information at their disposal, which allow them work with taxpayers to address their financial hardships and to become compliant.

Above all else, the IRS employee’s interest is in assisting struggling taxpayers to meet their tax obligations in a way that will not exacerbate their financial distress. When an IRS employee works with a taxpayer, the employee has access to all of the taxpayer’s information and can answer questions and offer advice. For example, they can see whether a taxpayer has not filed a return and explain that the sooner the taxpayer makes arrangements to address filing and balance due issues the less penalty and interest they will owe. They can look at the taxpayer’s records and answer questions about why they owe a balance and what they can do about it. They can also tell the taxpayer that they are not having enough taxes withheld by their employer and need to address that or that if an ex-spouse is claiming a child as a dependent they will not also be able to receive an exemption. If a simple mistake, like a math error, has occurred, they can fix it. They can provide an extension of the time period for payment. They can make a determination that the taxpayer meets the currently not collectible requirements or whether the taxpayer may be eligible for an Offer in Compromise, in which part of the balance due is foregone.

In addition to this wide-range of services, the IRS just last month announced a number of additional steps which will allow IRS workers to better assist financially distressed taxpayers. These include, providing IRS employees with greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay; allowing skipped payments or partial monthly payments for taxpayers in existing installment agreements that have previously paid on time but are no longer able to do so due to loss of employment or some other financial hardship; easing ability of some taxpayers to get an Offer in Compromise, and speeding delivery of levy releases for homeowners who are behind on their taxes who want to refinance or sell their homes.

Mr. Chairman, while these additional flexibilities will better enable IRS workers to provide some struggling taxpayers with the assistance they require to work through their financial difficulties, some of our most vulnerable taxpayers, including low-income taxpayers, those with language barriers, the elderly and the less educated will continue to be disadvantaged as a result of the IRS’ continuing use of private collection agencies (PCAs) to pursue tax debts. Aside from the folly of turning this inherently governmental function over to the private sector, use of the PCAs to collect taxes creates a double standard and disadvantages Americans who may be in the most dire straits.

Unlike the PCAs, the IRS is able to provide special assistance to the most vulnerable in our society. IRS workers can postpone, extend or suspend collection activities for a period of time, make available flexible payment schedules that provide for skipped or reduced monthly payments or waive late penalties or postpone asset seizures.

The PCAs cannot offer taxpayers any of these authorities. They can only request full payment of taxes owed either immediately or in an installment agreement of 5 years or less. What is worse is that taxpayers who deal with PCAs are extremely unlikely to know that other options are available to them if they deal directly with the IRS, because the PCAs do not inform them.

The PCAs sole interest is to collect from a taxpayer the balance due amount they have been provided. They have no interest in whether the taxpayer owes other taxes or may not have filed required returns, nor do they have access to any other taxpayer records, so they are unable to answer any questions, provide any advice or use any tools, such as extensions or offers in compromise.

In addition, while taxpayers unfortunate enough to be assigned to the PCAs are limited to interacting with the PCAs over the phone, vulnerable taxpayers that prefer personal, face to face tax assistance with IRS employees can do so at the 401 Taxpayer Assistance Centers (TACs) located nationwide. Taxpayers are able to visit the TACs when they have complex tax issues, need to resolve tax problems relating to their tax accounts, have questions about how the tax law applies to their individual income tax returns, or feel more comfortable talking with someone in person.

The IRS is also specially equipped to assist persons with limited English proficiency work through their financial troubles through its Multilingual Initiative (MLI). This service wide initiative provides written and oral assistance to Limited English Proficient (LEP) taxpayers in Spanish, Chinese, Vietnamese, Korean and Russian. This program ensures that non-English-speaking taxpayers who lack full command of the English language and are experiencing financial difficulties are able to take advantage of the wide array of services that the IRS can offer them.

In calling for an end to the IRS use of PCAs, Nina Olson, the National Taxpayer Advocate, an independent official within the IRS that looks out for taxpayer rights, has said that taxpayers who are unrepresented and vulnerable are disproportionately likely to be contacted by PCAs, and that the median income of taxpayers assigned to the PCAs is significantly less than that of taxpayers assigned to the IRS.

In addition, Olson has noted that no case can be turned over to a PCA in which a taxpayer is represented by a tax professional. Thus, “taxpayers who can afford representation are exempt from this initiative.” Clearly, that treats lower income taxpayers more harshly than others.

Clearly, a tax system relying on public confidence that everyone is paying her or his fair share is dangerously eroded by the double standard generated when bounty hunters collect taxes from vulnerable people for profit and people who work directly with the IRS are receiving assistance that those working with debt collectors are not.

NTEU strongly supports provisions in the Omnibus Appropriations bill to cut off appropriations for PCAs and supports H.R. 796 introduced by Chairman Lewis and Chris Van Hollen that would repeal the IRS’ authority to use them.

Mr. Chairman, NTEU believes that in a bleak economic landscape, with skyrocketing job losses, home foreclosures and rising credit delinquencies, the last step we should be taking is disadvantaging people who are among our most vulnerable taxpayers.

IRS employees remain committed to assisting delinquent taxpayers facing financial difficulties in the current economic climate. With access to a wide range of tools and information, the IRS can provide struggling taxpayers the flexibility and assistance they need to meet their tax obligations during the current economic downturn.