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IRS To Beef Up Ranks After Canceling Private Debt Collection

Agency to look for more "in-house" options to collect back taxes

By Martin H. Bosworth
ConsumerAffairs.com

March 11, 2009

Income Tax • IRS Alerts Public To New Identity Theft Scams • In Search Of Revenue, Feds May Look To Consumers • IRS To Beef Up Ranks After Canceling Private Debt Collection • Taxpayers Filing Earlier This Year • IRS Offers Help to Financially Stressed Taxpayers • IRS Faulted for Lax Identity Theft Protection Efforts • IRS Loses Nearly 500 Computers Over Three Years • GAO: IRS Still Not Doing Enough to Secure Data • Taxpayer Advocate Targets IRS Collection Policies • IRS Scales Back Outsourcing Plans • December is Tax-Prep Time • IRS Has Refunds for 95,746 "Missing" Taxpayers • GAO: IRS Needs More Oversight of Private Debt Collectors • IRS Gives Away Millions Due To Failed Software Upgrade • New IRS Online Payment System Raises Privacy Fears • Taxpayers Can Get an Automatic Six-Month Filing Extension • April 15th Should Be Just Another Day, Taxpayer Groups Argue • "Tax Freedom Day" Three Days Late This Year • Senators Push for Electronic Tax Filing • Paying Taxes With Your Credit Card Can Get Expensive • GAO Finds Tax Preparers Prone to Error • Consumer Group to Taxpayers: Don�t Borrow Your Own Money • States Oppose IRS Plan to Loosen Privacy Rules on Taxpayers' Returns • More ...

The Internal Revenue Service (IRS) is looking to expand its ranks and bring in more employees, after electing to end the controversial practice of outsourcing debt collection to private firms.

The Private Debt Collection (PDC) plan, begun in 2006, was championed by the Bush administration as a way of making government more efficient through privatizing non-essential functions. The PDC plan enabled private debt collection companies to pursue uncollected back taxes, and to keep as much as 25 percent of the collected fees.

But the plan was terminated on March 5, according to IRS Commissioner Dennis Shulman, who said that in the current economic crisis, IRS in-house employees "had more flexibility" than private contractors in working with struggling taxpayers.

"I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward," Shulman said.

Shulman anticipated hiring as many as 1,000 new employees to help with collection efforts and negotiate with taxpayers. "By investing in IRS employees to perform this collection work, we can be assured that we have all the tools available for helping taxpayers confronting complex situations," he said.

The PDC was estimated to have brought in $80 million for the government during its three years of operation, but it was also criticized for costing more than comparable public operations, and for allowing collectors to use abusive tactics such as threatening phone calls, many of which were illegal.

As early as November 2006, the Government Accountability Office (GAO) had reported that the IRS was not properly accounting for the costs of the program, and that it would lower any revenue brought in without oversight or controls, and the IRS began slowing its initial efforts to outsource the collection programs to make sure employees had proper training and security clearances.

A later study commissioned by the IRS and performed by the MITRE Corporation found that while every dollar brought in through collections cost the IRS $.07 cents, using private contractors cost $.24 cents per dollar collected.

The National Treasury Employees' Union (NTEU) hailed the decision as a victory, citing their long opposition to the PDC. "This result, a long time coming in the face of growing opposition to the program, is not only a good decision by the IRS, it is the right decision," said NTEU president Colleen Kelly.

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