IRS Contractors Aren’t Getting the Job Done

I’m not surprised by this, which I missed yesterday. As they say, better late than never. But, I totally agree with the assessment that the IRS should go back to doing their own collections, in part because it is less costly.

Congress should revoke the Internal Revenue Service’s authority to use
private debt collectors because the program doesn’t work and the
collection companies may be using unethical methods to “take advantage
of taxpayers,” the tax agency’s independent watchdog said.

Nina
E. Olson, the national taxpayer advocate, said in her annual report to
Congress that the agency struggled to supply contractors with accounts
to collect.

Contractors collected only 8 cents on the dollar from 11,500 delinquent
accounts that the IRS described as the easiest to pursue, the report
said. IRS employees could do better, Olson said.

“The
business case for using private collectors over IRS employees appears
to be weak,” Olson wrote in the 500-page, two-volume report released
Tuesday.

“Weak” is putting it mildly.

When I first wrote about the IRS outsourcing collections to private companies, the IRS commissioner told congress that privatizing collections would be more costly. Well, Bush and the then ruling-elite GOP didn’t listen. Capitalism won out, at a huge cost, to our government and to the people. At that time, it was estimated that these private collection companies would collect about $1.4 billion over 10 years, or 22-24 cents on the dollar.

Yesterday’s article reports that collections were far less than projected, only 8 cents on the dollar. Let me tell you, that 14 -16 cents on the dollar adds up pretty fast when one is talking about thousands of dollars.

What is again neglected in the LATimes article is that the outsourcing collections to private companies was not just endorsed by Congress, it was pushed onto the agency. Let’s not forget that important piece of information.

The move, an initiative of the Bush administration, represents the
first step in a broader plan to outsource the collection of smaller tax
debts to private companies over time. Although I.R.S. officials
acknowledge that this will be much more expensive than doing it
internally, they say that Congress has forced their hand by refusing to
let them hire more revenue officers, who could pull in a lot of
easy-to-collect money.

So, I’m a bit confused where the LATimes comes up with this assertion:

The use of private debt-collection agencies, endorsed by Congress, has
been criticized by consumer advocates, the National Treasury Employees
Union and the Government Accountability Office, which object to
for-profit companies collecting taxes. The IRS said private firms could
pursue undisputed debt more efficiently, freeing it to pursue contested
cases.

Nevertheless, the program has not worked, and it needs to be stopped by the new Congress.