Posted 9:03 AM by Creditwrench

Tax Experts Discuss New Efforts to Collect Back Taxes

By: SmartPros Editorial Staff

Oct. 17, 2003 (SmartPros) -- With more than $280 billion in taxes owed it, $77 billion of which is estimated as collectable, the Internal Revenue Service wants to crack down on delinquents. But right now, there aren't enough resources to recover the money, experts explained during the Tax Talk Today Webcast, "IRS Collection -- the Times are a'Changing."

"The IRS cannot hire enough people to handle this collection. It's too difficult to get everyone trained within a time frame that would be effective," explained Cheryl Sherwood, director of payment compliance within the Small Business/Self-Employed Division of the IRS.

Through the Collection Contract Support (CCS) Initiative that the IRS has proposed to Congress, the IRS will recruit private collection agencies (PCAs) to take on some of the collection workload. Performance of the agencies will be evaluated regularly to ensure they are staying within the guidelines of the contract. If pending legislation is passed, the initiative will be implemented within 15-18 months.

Brady Bennett, director of strategy and finance in the same small business division of the IRS, said the service will notify taxpayers by mail before a PCA contacts them. The private agencies will only contact taxpayers via mail and phone; there will be no house calls. Finally, taxpayers will send payments directly to the government, not to the PCA.

Taxpayers will have the option to decline contact by a PCA, and to request working only with the IRS. Panelists agreed that such a choice isn't encouraged, because the new process is designed to benefit both taxpayers and the IRS.

If taxpayers are unable to pay the full amount of taxes owed, they can submit an Offer in Compromise (OIC), essentially suggesting settlement on a reduced amount. Under the reformed collection process, the IRS will now charge $150 for that review.

"This fee will offset administrative costs and help to lower the number of frivolous offers received. Ultimately, this will make the program more timely and efficient," said Sherwood.

The IRS has a "zero tolerance" policy on OICs, meaning they must be complete and meet all requirements. If an offer form fails that initial test and is declined, the fee will be returned. However, after that stage is passed, the fee will be kept by the IRS, whether or not the offer is accepted.

Separately, in the show's "Breaking Tax News" segment, it was announced that the standard rate for deducting business mileage will be raised to 37.5 cents a mile in tax year 2004, up from 36 cents. Also, for the first time, beginning in 2004, taxpayers that use up to four vehicles at the same time for business purposes can use the standard mileage rate.

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