Pros & Cons of Outsourcing the Collection of Tax Debt

Posted on August 24, 2015 by Kursti Nakagawa

Pros and Cons of Outsourcing the Collection of Tax Debt

Pros & Cons of the Outsourcing of Collection of Tax Debt

The Senate Finance Committee has recently revived their discussion of outsourcing the collection of back taxes. According to certain estimates, turning the collection of delinquent taxes over to private collection agencies would save the government more than two billion dollars over a period of ten years. However, opponents of privatization maintain that this would not be the case. In addition to emphasizing the potential threat to taxpayer security, they point to attempts at outsourcing the collection process that have not worked particularly well in the past. Time will tell whether the Treasury Secretary, who currently has the authority to make such a switch, will give it another try.

Those who favor privatizing the collection of tax debt say that it will raise more revenue that it costs. While this did not happen in a previous attempt at outsourcing that was made between 2006 and 2009, proponents say that the powers that be have learned from their past mistakes.They say that turning IRS collections over to private collection agencies will generate extra revenue that The IRS can use to hire new employees. In addition, they point to the fact that removing the task of debt collection from the IRS will allow the understaffed agency to focus its human resources on other important tax matters that have suffered in recent years.

On the other side of the fence, opponents of outsourcing say privatizing the collection of tax debt will not work. The National Treasury Employees Union points to data from the previous attempt at outsourcing which shows that the IRS collected over 60% more in the first two years of the program than the private collection agencies did – $139 million compared to $56 million. Although the private companies did better at collecting from cases where the amount owed was not in dispute, they lacked the authority to collect in the more difficult cases. The Center for Effective Government maintains that private companies will never be as effective as the IRS at collecting back taxes. According their spokesperson. “Collecting back taxes is an inherently governmental function, something that the government is uniquely positioned to do.” The IRS is the only collection agency that can garnish wages, levy bank accounts, Social Security benefits and 401k plans, place tax liens on property and even seize assets, all without judicial approval! These powers indeed make it the most powerful collection agency in the county, a fact that opponents of outsourcing tax debt collection are quick to point out.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Tax Fraud Brings Serious Consequences

Posted on July 15, 2015 by Kursti Nakagawa

Tax Fraud

Tax Fraud Brings Serious Consequences

It turns out that tax fraud brings serious consequences as evidenced by the sentencing, earlier this year, of Rashia Wilson to 21 years in prison for multiple counts of aggravated identity theft and wire fraud. Ms. Wilson, otherwise known as the “Tax Fraud Queen,” was originally convicted and sentenced in 2013 when she plead guilty to stealing over $3 million dollars in a tax refund scam. Her original sentence, which was thrown out on appeal in 2014 due to errors in applying sentencing guidelines, was reinstated earlier this year.

From April of 2009 through September of 2012, Rashia Wilson and several accomplices were successful in carrying out a scheme that defrauded the federal government of approximately $3.1 million in tax revenue. They did this by obtaining personal information from medical billing records and financial statements and using this to generate fraudulent tax returns without the knowledge or permission of the taxpayers whose information was being used. Once the returns were filed, they collected the tax refunds in the form of U.S. Treasury checks and prepaid debit cards. This scheme continued successfully for over three years and four tax seasons until investigators finally cracked the case in the fall of 2012. Throughout most of this time, Wilson bragged about her tax crimes on various social media sites and taunted the IRS, saying that they would not be able to indict her. In her own words, she proclaimed, “I’m Rashia,the queen of IRS tax fraud … So if you think indicting me will be easy, it won’t.”

The filing of false tax returns as Ms. Wilson and her accomplices did is treated very harshly by the legal system. While failing to file a return is considered a misdemeanor, the filing of a fraudulent return is a felony and is typically given a much more severe consequence. Although the national average sentence for identity theft is 43 months, the sentencing judge handed down a much longer sentence in the case of Rashia Wilson. U.S. As U.S. District Judge James Moody Jr. said at her sentencing hearing, “She knew she was doing wrong (and) … reveled in the fact that is was wrong.” He cited a formula that takes into account the seriousness of the offenses as well as the defendant’s prior criminal convictions as the reason for her harsh sentence.

In response to the case of Rashia Wilson and others like it, the IRS has stepped up its efforts to combat identity theft as well as other types of tax fraud. As recently as this week the Financial Crimes Enforcement Network issued a Geographic Targeting Order requiring check cashing companies in two Florida counties to verify the identification of any person cashing a federal income tax refund check. These types of restrictions are aimed at identifying and stopping tax fraud schemes such as the one described above.

New Agreement Increases Fraud Protection

Posted on June 15, 2015 by Kursti Nakagawa

New Agreement Increases Fraud Protection

As a result of a Security Summit that was convened in March, the IRS has announced a comprehensive new agreement addressing the issues of tax fraud and identity theft. The agreement, which has been a work-in-progress over the past twelve weeks, comes as a result of the combined efforts of federal and state tax administrators, tax preparers and tax and payroll software firms. It includes new steps to validate taxpayer identity, increase information sharing between government and the tax industry and identify fraud schemes. According to Tax Commissioner John Koskinen, the agreement “represents a new era of cooperation between the IRS, states and the electronic tax industry.”

Over the past twelve weeks, the members of the Security Summit have focused their efforts on several new initiatives, all aimed at detecting and preventing tax refund fraud. The major points of their strategy are outlined below:

 Raising taxpayer awareness

This effort is designed to educate taxpayers on methods of protecting their tax and financial information and to increase their awareness of the dangers of tax fraud and identity theft.

 Authenticating taxpayer information

Included in this initiative are steps designed to authenticate the computer device tied to a return’s point of origin and to review the data tied to the transmission process. The review of transmission data will focus on such items as the internet address associated with the return as well as the metadata generated by its electronic submission.

 Identifying fraud

This initiative incudes an expanded effort to gather analytical information and fraud data from all parts of the tax industry. Because fraud schemes are easier to pinpoint with large amounts of data, this initiative should help to identify fraud schemes before they have a chance to proliferate.

 Sharing information

As part of this effort the committee plans to establish a Refund Fraud Information Sharing and Assessment Center. This will allow the public and private sectors to share tax information efficiently which, in turn, will provide more accurate data to support fraud investigations.

 Increasing cybersecurity

Under this initiative, members of the broader tax industry have agreed join the IRS and state tax agencies in abiding by the cybersecurity standards set by the National Institute of Standards and Technology.

Tax Commissioner John Koskinen summarizes the recent efforts of the Security Summit by saying that they should give taxpayers “a safer and more secure experience” this next filing season. He goes on to say that, although the recent agreement represents great progress in the area of taxpayer security, efforts to safeguard the tax filing procedure will continue. According to Koskinen, this new effort is “good for taxpayers, good for tax administrators and good for the tax community.”

IRS Announces Online Security Breach

Posted on June 1, 2015 by Kursti Nakagawa

New IRS Security Breach

IRS Announces Online Security Breach

On Tuesday, May 26, 2015, the IRS announced the detection of a huge security breach affecting over 100,000 United States taxpayers. This appears to be a significant online breach that occurred during the course of the 2015 tax season. According to the IRS, thieves used an online IRS agency service to obtain the previous year’s tax return information for about 100,000 individuals and families.

These identity thieves have been very persistent and sophisticated. From February to May, they have been using stolen social security numbers and other relevant personal information to access tax agency systems in order to file tax returns and get refunds. IRS Commissioner John Koskinen issued a statement saying that approximately 200,000 tax transcripts were downloaded with approximately 104,000 of those successfully accessed. Apparently the attempts by the thieves to gain access to the remainder of the downloaded returns were unsuccessful. However, the IRS plans to inform all 200,000 taxpayers whose returns were in any way involved in the breach.

This is not a typical hack or data breach involving one account number or piece of personal information. Instead, these thieves are sitting on piles of personal information that they can use at any time. In order to access the desired accounts, they had to clear a multi-phase questionnaire which involved providing such information as the taxpayer’s social security number, birthdate, address and tax filing status. Even more puzzling is the fact that the thieves had to answer personal questions about such things as the maiden name of the taxpayer’s mother, their high school mascot and where they attended college. The IRS believes that the thieves obtained some of this information by looking at public social media sites.

The thieves were hoping that their criminal efforts would go undetected by the IRS and that they would gain access to full tax returns that would give them vital personal information to use in the future. However, their attempts to stay under the radar have failed. The IRS has identified, not only those 104,000 tax returns that were actually accessed, but also the 100,000 returns where access was attempted but unsuccessful. They have responded by providing free credit monitoring services to all of the taxpayers that were in any way affected by the breach. According to IRS officials, the budget cuts that they have recently experienced have made it increasingly difficult to fight the fraud issues that have been occurring at a rapid rate over the last several years.

Smart Ideas for Spending an IRS Tax Refund

Posted on May 13, 2015 by Kursti Nakagawa

Smart Ideas for Spending an IRS Tax Refund

Tax Refund Time?

After paying the government all year long, many taxpayers will see some money coming their way now that it is tax refund time. Even better is the fact that tax refunds have been on the rise over the past several years. The average tax refund check has risen from $2,371 in 2009 to $2,893 in 2015. However, before these funds are used to pay for an expensive vacation or a finance a wild spending spree, it might be wise consider some of the following smart ideas for putting your IRS tax refund dollars to work:

Invest in your home. Has your leaky roof been worrying you? Has your garage door not been working as well as it used to? First things first! Since your home is often the largest investment you have, it might be wise to use tax refund money to take care of home repairs and even some upgrades. Your tax refund is a nice chunk of money that is not part of your ordinary household budget and may very well be enough to take care of most minor home maintenance issues. You may be even able to get that fresh coat of paint on the outside of your house that you have been wanting to get for years! Being proactive about taking care of your home will usually save you money in the long run and is nearly always a good investment decision.
Get a home energy audit. Investing in a home energy audit is actually an excellent way to use tax refund Such an audit consists of hiring a professional to come into your home to assess energy consumption and suggest ways of making the home more energy efficient. After the inspection, the professional will issue a report suggesting such energy saving measures as sealing holes and adding insulation that can potentially result in significant savings on utility bills for years to come. Although a home energy audit can cost anywhere from $50 to a few hundred dollars, it is an investment that will more than repay itself over time. Go to https://energy.gov/public-services/homes/home-weatherization/home-energy-audits for more information on this money saving measure.
Contribute to your retirement account. Most individuals have access to some type of employee sponsored retirement plan such as a 401(k), a 403(b) or a 457. Even if you are already contributing to such a plan, your scheduled monthly contributions may not equal the maximum yearly contribution which is $18,000 ($24,000 for individuals over 50). If this is the case, you can use your tax refund to make a one-time contribution. This is an especially wise spending choice if your yearly contributions are under an amount matched by your employer. Similarly, if you are not working for a company that offers one of these retirement plans, you can use your tax refund dollars to contribute to a traditional IRA. Both of these investment choices defer taxes on the money in the year in which it is received and are a great way to boost savings since they allow the money to grow over time.
Invest in your career or education. If you want to get ahead in your career, your tax refund is a great way to invest in yourself. Take those extra college courses you have always wanted to take or enroll in a continuing education program. Although these educational opportunities may cost as little as a few hundred dollars, they can enhance your career skills and increase your earning potential. Weekend conferences may be another worthwhile career investment. There are actually numerous ways that tax refund dollars can be put to good use to advance a prudent taxpayer in their chosen field. Sometimes a little money up front goes a long way toward increasing future earnings!
Take care of everyday items. Do you need new tires? Is there some dental work you have been putting off? It may be a good use of tax refund dollars to take care of these types of chores, before they catch you off guard. Then maybe, if there is anything left after you have made an investment in your future, you can spend a little of your tax refund frivolously!