Highway Bill Creates Tax Collection Changes, New Penalties

 Posted on December 29, 2015 in Taxation Law

Taxpayer complaints led the IRS to abandon the practice in 2006 but now it is set to return: using private collectors to pursue overdue federal tax payments. Subcontracting with private collection firms was approved by President Obama when he signed the recent federal highway bill—also known as Fixing America's Surface Transportation (FAST) Act, HR 22—on December 4, 2015. According to multiple media sources, including the Hill, the president signed the legislation with only hours remaining before federal funding for highways was set to expire. FAST should provide funding for the nation's highways and other infrastructure for the next five years without increasing gasoline taxes. The law also has substantial implications for taxpayers who owe a significant amount of money to the IRS. In addition to authorizing the use of private collection agencies for some tax collections, FAST also includes a new penalty for taxpayers who have "serious" tax debt that is delinquent.

As a result of the new law, taxpayers who owe more than $50,000 in unpaid federal taxes will now have their applications for passports or passport renewals denied. Supporters of this approach believe this new penalty may be an incentive for payment and predict it will garner nearly $400 million dollars in tax revenue over the next 10 years.