Tax Season Is Almost Here

Those of you already in debt; tax season is almost here. It's time to create a plan to get out of debt. That plan should include using any tax refund for paying down that debt rather than going to the local strip club. Sure, strippers are good wholesome fun, but that debt has you in a world of hurt right now. Do it. Do it.

Bailout My Butthole

I'm in debt and cannot afford the adult butt wipes I oh-so cherish. Bailout my butthole government. Bailout my butthole.

60 Minutes Covered Geek Derivative Formula Creation in 1995

Watching this, it should have been completely obvious what was coming.

Derivatives & Debt: The Coming Crisis

The stock market is tanking. People have an impending sense of doom in their gut. Banks are leveraged via derivatives to the hilt and are on the brink of collapse. People are carrying an absurd amount of credit card debt, falling deeper and deeper into the vicious circle of high interest rates and minimum payments.

Is the empire coming to an end? Is it all by design? These are questions going through my head today. Thank God I have NO PERSONAL DEBT.

The National Debt

The US national debt continues to spiral out of control, mostly due to the illegal, undeclard Iraq war. Right now we're looking at 9.5 TRILLION dollars! FOR THE LOVE OF GOD! Right now, each US citizen would owe $31,290.73 if debt collection began today.

Can we really afford this as a nation? I think NOT! We need to clean this mess up NOW or face absolute despotism! No wonder the US dollar has lost over half it's value over the last 8 years. Great Depression 2, here we come!

What do you do when bills stack up?

Several different options could help sort out your financial problems when bills start to stack up, and up, and up, and you just can't afford pay them off. You could set up a debt payment plan and force yourself to stay in line with it (the best option.) If you aren't mature enough to follow a plan alone, seek out the help of a credit counseling service, or debt consolidation service (the second best option.) You could also go the lowest common denominator route, a court provision, such as bankruptcy, to handle your credit obligations (this should be your very last choice!).

Comments are welcome!

IRS or private debt collectors? What's the answer?

Collecting overdue taxes is definitely not an easy feat. To help the IRS gather these delinquent monies; Congress decided to legalize the use of private collection agencies in 2004. This program was finally implemented in September 2006 with much scrutiny abound.

A recommendation by IRS’s independent taxpayer advocate Nina Olson’s 2006 annual report to Congress is to have the IRS’s authority to utilize private debt collectors repealed “once and for all”. Olson lists the use of private debt collectors by the IRS as one of the five most serious taxpayer problems.

Here are a few of the reasons why it made the top five:

Is it cost effective? These private collection companies receive 25 percent of the money they gather from unpaid taxes and at the same time, the IRS has recognized the fact that these companies cannot collect as efficiently as their own organization. In-house, the IRS’s return on investment is $32.00 per dollar, whereas the private agency return is that of $4.00 per dollar the government invests, according to the Olson report. The report went on to state the IRS admission that it could do the job with the thousands of collection employees as well as the almost $2 billion collection budget. Olson states, “In contrast, (private collection agencies) PCAs at this stage of the initiative are using 75 employees to collect on these accounts, and the IRS is using 65 employees to monitor them.” Rep. Steve Rothman, D-N.J. is on Olson’s side saying "This outsourcing program is estimated to cost tens of millions of dollars a year, and has already allowed the most complained-about industry in America to get hold of tax returns, which include taxpayers' Social Security numbers."

The last statement brings us to the questions:

Is it safe? The IRS is well aware of whom we are and the 9 digit number attached to our name; however, new questions arise when a private company has access to our tax returns as well as our social security numbers. Identity theft? It does bring about that risk.

Is it in the best interest of the taxpayer? The Taxpayer Advocate Service has taken notice of "poor customer service to multilingual taxpayers, (private collection agencies') operational plans being withheld from public disclosure, and PCA collection scripts through which PCA employees attempt to manipulate taxpayers."

The IRS has acknowledged this observance and stated that two of the three private collection companies assigned to collect delinquent taxes have a bilingual staff and apparently, the third company is in the process of handling non-English speaking callers.

As for concern of deceit or trickery used by these private companies to persuade the taxpayer into paying, the IRS stated, "Given the backlog of IRS receivables and our limited collection resources, [this] initiative allows the IRS to ensure that more delinquent taxpayers are personally assisted in meeting their obligations, and we will continue to make program decisions to protect the privacy and security of taxpayers while collecting outstanding government debt."

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There are reasons why many believe Congress took a step in the right direction back in 2004 when it authorized the Internal Revenue Service to utilize private debt collectors to collect unpaid taxes.

The first reason deals with the tax gap which totals 290 billion and is expected to grow even larger in the near future. There are 7.4 million Americans who do not pay their taxes and who are also never contacted by the IRS regarding this delinquency due to low budgetary funds. To close the gap between the amount of taxes assessed and what is actually paid in to the IRS; outsourcing tax collection has been initiated and has already brought in some of those unpaid taxes.

Secondly, the use of private debt collectors over the next ten years could possibly bring in an estimated 1.4 billion in unpaid taxes. The resources collected by these third party agencies could be used for fundamental societal needs such as health care and education.

Reps. Chris Van Hollen, D-Md., and Steve Rothman, D-N.J. are in the midst of trying to eliminate the use of private agencies and are advocating hiring more IRS employees to do the tax collecting at a lower cost than the agencies. Rothman also stated that there are tight budgetary constrictions and hopes that Congress can find the money to do this. However since the program was instituted in September of 2006, 8.4 million dollars was collected within the first ten weeks of the program which exceeds the six percent collection goal.

Furthermore, according to the Government Accountability Office report, the IRS has stated that if more agents were hired, their concentration would be on the more difficult and/or criminal cases; whereas the private agencies would take the weight off of the IRS’s shoulders and help collect funds due from the smaller, less complex cases.

The taxpayer privacy issue has been mentioned regarding an appeal of outsourcing tax collection; however, the IRS as well as the treasury inspector general for tax administration keeps a close watch on the program for this very reason and only the specific information needed to collect unpaid taxes is given to these agencies.

Some have said that these particular agencies may practice unethical ways of collecting unpaid debts; however, the three agencies that were chosen are not only kept under close scrutiny but had to undergo and pass a strict evaluation process to even be considered. Out of thirty highly regarded firms throughout the U.S., these three agencies were tested and elected to this position based on a small number of consumer complaints, high level of experience, and wholly moral business undertakings.

By using these private debt collection firms, there is not only a benefit to honest tax paying citizens but also a chance to narrow in on the enormous tax gap that affects these honest tax paying citizens.

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The national Taxpayer Advocate Nina E. Olson who works independently within the Internal Revenue Service has submitted the annual report to Congress sighting nonpayment of taxes as one of the top five biggest issues facing taxpayers. To help ease the pain of delinquent taxes, Congress gave the thumbs up for the program that utilizes private sector debt collection agencies, and since the introduction of the pilot program this past September…the debate escalates as to whether or not it is a good idea.

It seems to always boil down to a numbers game. Delinquent taxes should be collected, and the IRS has outsourced three qualified, reputable agencies and 75 contract workers to take care of this serious collection issue. However, the IRS has 65 employees supervising the 75 individuals. Should those 65 employees be collecting the taxes themselves, therefore saving the IRS money by keeping the collecting in-house? Is this the efficient way to go? Not according to Ms. Olson. She states in the report, "It is difficult to fathom how 75 employees can achieve what the IRS cannot with its thousands of collection employees." The IRS defends the outsourcing by saying the 65 employees work as needed and “the time they are putting in is only equivalent to 31 full-time workers.”

Still, the National Treasury Employees Union that represents IRS employees as well as members of Congress are petitioning to do away with the IRS’s use of these private debt collecting agencies. The efficiency as well as the effectiveness of the program is being questioned.

Ms. Olson stated, "the hidden costs of using private collectors, notably potential erosion of customer service, lack of transparency of private collection operations, potential failure to provide consistent treatment for all taxpayers, and potential erosion of tax compliance."

A commission of up to $0.25 of every dollar collected by these private sector agencies will be paid; however, on the other side of the coin, the IRS estimated that $1.4 billion will be collected over a ten year span because of this outsourcing program. Because these private agencies will be focusing on the smaller, less complex cases, IRS revenue agents will now have the time to concentrate on the more difficult criminally charged cases of tax delinquency. Money needs to be paid out to these agencies in order for this to happen.

Ms. Olson stated that the IRS budget process “makes little sense”, because in essence, collecting unpaid taxes in-house remains to be less expensive than outsourcing. She reported that Congress should weigh the options and think about making a change in the IRS budgetary rules. It was recommended that the IRS receive funds that are intended to maximize the tax fulfillment as well as raise the IRS’s workforce support two to three percent. This could improve the efficiency of the delinquent tax collection, since more money for more IRS employees would keep the tax collecting in-house. This could save money in the long run by not resorting to outsourcing, placate the debate as to whether or not the use of private debt collection is a good idea, and once and for all close the tax gap.