IRS Private Debt Collectors Celebrate One Year Mark

A trade group representing collection agencies collecting on a contract from the IRS marked the one-year anniversary of the IRS private debt collection initiative today. The pilot program has garnered $24 million through the 77,000 cases referred to the two private collectors currently collecting on behalf of the IRS, according to the Tax Fairness Coalition.

Congress approved the IRS request to contract with private collectors in 2004 and the initiative began as a pilot last September. The program is scheduled to expand to 10-12 collection agencies in March 2008. However, the plan faces legislative hurdles with the U.S. House of Representatives considering a bill some time this year to repeal IRS authority to enter into contracts with private collectors.

Coalition spokesperson Dan Drummond told insideARM.com today that the program’s best allies may be in the Senate rather than the House. Sen. Chuck Grassley, a Republican from Iowa and ranking member of the Senate Finance Committee, said in a May 2007 letter to Treasury Secretary Henry Paulson that he wants to see the program expanded. “The American people have a right to expect that those who have tax due and owing pay those taxes. Otherwise, it is only the honest who shoulder their fair burden,” Sen. Grassley said.

The program has been under fire since its start. The National Treasury Employees Union has said that the program performs the same services that IRS employees could perform for less money. The NTEU’s position is that the IRS should staff up to go after the delinquent accounts.

The Tax Fairness Coalition counters that the program feeds money to the IRS specifically for additional staff and that the accounts farmed out to private collectors are so far down the chain, they would not be worked by IRS employees anyway.

The coalition claims that $6 million of the $24 million collected went directly to the IRS for administrative use and that the money could fund up to 36 new full time jobs at the IRS.