Thought Your Tax Info Was Private & Safe? Not If The IRS Privatizes Its Collections!

Twilight of Tax Privacy

For most people, the apparently hard-wired human reluctance to pay taxes is overcome by the knowledge that it's illegal not to. The Internal Revenue Service, in turn, is legally bound to keep tax returns private.

For now, anyway. This month, the I.R.S. hired three private collection firms to help the agency collect overdue taxes. Authorized by Congress two years ago, private collections are scheduled to start this year, with the I.R.S. providing names, contact information and the amounts of the taxes owed.

It seems unlikely that private collectors will meet the I.R.S.'s confidentiality standards. Privacy protection is part of the I.R.S. culture. If an I.R.S. employee improperly discloses taxpayer information, he or she faces serious consequences, including dismissal. It's unclear what the punishment would be for a private collector.

A House subcommittee also raised questions yesterday about whether private tax collection would make financial sense. The fact that the I.R.S. would have more success than private collectors in collecting unpaid taxes is not in dispute. But the budget rules don't allow the I.R.S. to claim credit for the extra taxes it would bring in if it had more collectors, so the agency has not been given the money to hire more people.

Some lawmakers say that private collections are better than nothing, but that's not necessarily so. Many taxpayers who are contacted by private collectors — yet unable to pay — will be bounced back to the I.R.S., forcing the agency to spend its scant resources on small cases.

Is there anything that the GOP won't attempt to privatize?