Government Overestimated Your Obamacare Subsidy? Private Debt Collectors May Come After You
There's a bill in the Senate now to have tax bills and other IRS receivables turned over to private debt collectors. This has been done before -- disastrously -- and lost money, though making money is program's entire reason for existing, points out taxpayer advocate Nina R. Olson.

Lori Montgomery writes in the WaPo:

The provision was tucked into a larger bill, aimed at renewing an array of expired tax breaks, at the request of Sen. Charles E. Schumer (D-N.Y.), whose state is home to two of the four private collection agencies that stand to benefit from the proposal.

It requires all "inactive tax receivables" to be assigned to private debt collectors if the IRS cannot locate the person who owes the money or if IRS agents are unable to make contact within a year.

Some taxpayers would be spared the barrage of notices and phone calls, including innocent spouses, military members deployed to combat zones and people "identified as being deceased."

But bereaved relatives could find themselves under siege for unpaid estate taxes under the proposal. So could people who incur a tax debt under the new Affordable Care Act -- either because they owe a penalty for not buying health insurance or because the government was too generous in estimating the size of their health-care tax subsidy.

And there's this:

Schumer spokesman Matt House added that the senator is open to clarifying the measure to ensure that tax debts resulting solely from the Affordable Care Act would be exempted.

Yes, Schumer, whose district would benefit from jobs from this, will do what he can to grrrease this through.

Olson on the details:

Although the IRS aggressively pursues those judged able to pay, Olson, an IRS employee who serves as the taxpayers' voice in the agency and before Congress, said the agency takes a more flexible approach to those who are struggling financially. In many cases, she said, the IRS simply waits for the taxpayer to amass a refund and uses that money to bring the account current.

"Why am I paying the private collection agencies 25 percent when just for the cost of the machine running we get the money anyway?" she said.

More to the point, Olson said, private debt collection has not worked well in the past. During the most recent attempt, from 2005 to 2009, IRS information shows that private agencies collected about $98 million. But they were paid $16.5 million in commissions. And it cost the IRS an additional $86 million to administer the program, including money spent to make sure the contractors did not use sensitive IRS data to benefit their private customers, such as credit card companies.