The U.S. has a progressive income tax system. Therefore, the rate of tax increases as taxable income increases. The purpose of imposing progressive taxes is to reduce the tax incidence of people with a lower ability to pay taxes, as these taxes shift increasingly to those with a higher ability-to-pay. Thus, the bulk of tax revenue is in high-income households.
Statistics just released by the IRS show that the top 1% of households received more than 20% of adjusted gross income in 2014 while paying almost 40% of income taxes. Less than 4% of income tax is paid by the bottom 50% of households. Federal tax rates in 2015 varied from 10% to 39.6%.
In the spring of 2017, the IRS will begin outsourcing the collection of not all, but some, overdue federal tax debts to private contractors. In early December of 2015, President Obama signed into law the Fixing America’s Surface Transportation Act, or “FAST Act.” The FAST Act provides funding for transportation project over the next ten years. Of course, any bill related to highways is likely to include provisions requiring the IRS to use private debt collection companies, which this bill, in fact, includes.
For individuals with delinquent tax debt, thoughts of IRS contact may haunt their daily thoughts. IRS operatives may be lurking, waiting, ready to move in and assert their authority. At least this has often been the public perception, albeit somewhat exaggerated. However, this may be more likely of an occurrence in 2016 as IRS representatives seem to be regularly “visiting” taxpayers at their homes and places of employment! The tax professionals at the Thorgood Law Firm can assist any taxpayer that receives an unexpected visit from IRS personnel. Just who are these representatives and agents of the IRS?