IRS To Taxpayers: “No More Mr. Nice Guy.”

Taxpayers beware! The IRS is going to become much more aggressive in the coming months about collecting the taxes that it is owed. The IRS estimates that the current tax gap – the difference between what is owed the government and what has been paid is $300 billion. That’s a lot of moolah. And, the IRS figures that in this time of soaring budget deficits, that collecting on that $300 billion would do the country a lot of good. As IRS Commissioner Mark Everson recently said, “Certainly, if we can reduce the tax gap, that’s really going to help the country. Also, I would say it’s a question of basic respect for the rule of law. We can’t have people not paying what they owe.”

Over the past few of years, in keeping with trying to create a better image for itself, the IRS was not enforcing collections as aggressively as it once did. However, that is now about to change. According to Brady R. Bennett, Director of Collections at the Small Business and Self-Employed Division at the IRS, “We can’t walk away from the fact that taxpayer rights exist, and we need to adhere to those taxpayer rights. But, at the same time, we need to do our job with respect to collection and taxes, and that means in certain situations, taking appropriate enforcement.”

In January 2006, the IRS is launching a pilot program that will use three private collection agencies to assist in tax collection. The program will focus on individual taxpayer accounts owing less that $25,000 and deemed “highly collectible” by the IRS.

Taxpayers assigned to a private collection agency will receive notification from the IRS that includes contact information for both the IRS and the collection agency. The collection agency will have the authority to reach a payment agreement with the taxpayer and will be bound by the same legislative requirments as the IRS. The collection agency will have no enforcement powers however. Also, all taxpayer payments will still be made to the IRS.

As a result of this new initiative, many taxpayers owing the IRS will soon be seeing notices in their mailboxes. Obviously, the best solution for anyone owing the IRS is to pay up. Not paying the IRS can eventually result in nasty tax liens, frozen bank accounts, and wage garnishments.

What if you can’t pay? There are some options available. I’ll be covering those in a future post.