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Congress Passes Tax Reform Bill, Including Changes for Private Collection Program

Congress has approved a bill that will change the type of unpaid income tax debts that can be placed with private collection agencies.

Both the House of Representatives and the Senate last week passed votes on the Taxpayer First Act, which includes a series of reforms at the Internal Revenue Service, such as establishing an income floor for an individual to have his or her tax debt placed with one of four private collection agencies.

Under the new bill, the IRS will not be allowed to place unpaid tax debts with an agency for individuals who earn less than 200% of the federal poverty line. The federal poverty line for an individual living in the continental United States is $12,490 in 2019, and goes up $4,420 for each additional individual living in a household.

Originally, Democrats wanted to set the limit at 250% of the poverty line, but that was negotiated down to 200%, according to a published report.

Critics of the program have noted that a disproportionate number of lower-income individuals are having their debts placed with one of the four private agencies, leading to calls that the IRS was targeting low-income individuals. A report from the IRS’s Taxpayer Advocate noted that 43% of individuals who had entered into payment plans with one of the four agencies had an income below 250% of the poverty line.

“This bipartisan, bicameral bill represents years of hard work and consensus building. It’s a big first step toward strengthening taxpayer protections and turning the IRS into the customer service organization it ought to be,” said Sen. Chuck Grassley [R-Iowa], who sponsored the legislation in the Senate, in a statement. “I look forward to President Trump signing it into law so the IRS can begin implementing long overdue reforms that will put taxpayers first.”

The program has been a net-positive for the federal government, generating $51 million in profit for the 2018 fiscal year and $30 million during the first quarter of the 2019 fiscal year.

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