As House Approaches Vote (Again) on Private Debt Collection for IRS, Members Should Consider This

Stephanie Eidelman

I read an article last week on The Hill website that concerned me. It was by Chi Chi Wu, a staff attorney of the National Consumer Law Center, and argues that Congress should (again) dismiss the idea of the IRS using private debt collectors.

Ms. Wu references an upcoming vote on Section 52106 of H.R. 22, the bill that the Senate approved in July to extend the Highway Trust Fund. Section 52106 is in the list of “Offsets,” under Subtitle A – Tax Provisions, and is titled “Reform of rules relating to qualified tax collection contracts.”

When an article appeared on this topic in July in the Huffington Post, Tim Bauer wrote about the fact that it only presented one side of the story.

I have the same concern about Ms. Wu’s article in The Hill. I don’t know how widely read The Hill is or isn’t within the general public, but I suspect it is widely read by those House members and staffers who will influence this vote. Here is a summary of what she says:

• The IRS tried using private collectors twice, and the results were “disastrous” both times.
• The first attempt (in the mid-1990’s) was scrapped after a year after taxpayers lost $17 million and it was found that some collectors had violated the FDCPA.
• The second attempt began in 2006 and was cancelled three years later

With government and politics, the devil is always in the details, which tend to get lost – because details are often complex and overwhelming – and boring. The facts are not so cut and dried as Ms. Wu would suggest.

In 2011 the Treasury Inspector General for Tax Administration (TIGTA) evaluated IRS progress on the accounts recalled in 2009 from the cancelled Private Debt Collection (PDC) program. Their report found that prior to the recall of PDC cases, the IRS did not have the resources to work the cases.  It also said that the IRS took appropriate action on cases returned from the PDC program in FY2007 because the 2007 recall included procedures that required IRS employees to work every case returned. However,  TIGTA said those procedures were not in place for the larger recall in 2009 and that these cases were not selected for collection action due to collection policies and inventory assignment practices.

“We did not consider a case actually worked unless it was assigned to an employee and collection actions were taken by that employee. Cases have a higher probability of collection when taxpayers are contacted,” Michael R. Phillips said in a memo.  Philips is the Deputy Inspector General for Audit at the TIGTA’s Small Business/Self Employed Division.

As a result of the inaction, the TIGTA estimated in 2011 that as much as $516 million will go uncollected over the next five years from similar unassigned cases in the IRS’ inventory that would have been assigned to the PDC collection program.

The government holds private companies to a very high standard when it comes to protecting consumers. I have no argument with that basic premise. But when government representatives, consumer advocates, and politicians claim that government can do so much better and upholding those standards, I see a serious double standard.

Colleen Kelley, then president of the National Treasury Employees Union, counted the cancelled PDC program among her achievements. She said IRS employees could do a better job, if only there were more of them. Okay, but then there weren’t more of them. Congress cut their budget. How was that going to work?

Earlier this week we came across this press release from TIGTA, which highlights the current finding that, in spite of warnings, the IRS continues to use Social Security Numbers on hundreds of millions of notices and letters mailed to consumers. This practice is a treasure-trove for identity thieves. If a private business — or worse, a collection agency — did this, the story would be national headlines and consumer rights attorneys would be screaming.

Indeed, I consider this every time I have to mail a tax payment – including (as instructed) my Social Security Number on my check, along with the form, which also includes the number, addressed to an IRS office. It couldn’t be a more obvious target. I am very uncomfortable leaving this in my mailbox.

So yes, private companies are not perfect. And big programs are likely to be flawed right out of the gate (gee, that never happens with government programs). Perhaps a better approach is to tweak and improve a process that has merit rather than throw the whole thing away in a feat of partisanship or one-sided conclusions. After all, this isn’t about politics; it’s about doing the best thing for taxpayers (or should I say “tax non-payers”), right?