I've written a lot on the use of private IRS debt collectors. Here is a mini-status report.
I was checking in on Congress progress on eliminating the IRS's use of private debt collectors. Last week they had a knock down drag in the House. In the end, the House voted 232-173 to end the use of private collection agencies by the IRS by passing the Tax Collection Responsibility Act (H.R. 3056). Things in the Senate are more in play at the moment.
So far it appears that the use of private debt collectors is about a $40 million loss. They have collected about $30 million in debts. The start up costs appear to have been as high as $71 million. That may or may not include the 21-24% bounty the private tax collectors get for each dollar collected.
Here is the math according to the NTEU:
According to IRS reports, the program has failed to meet 2007 revenue projections by a significant amount. The companies collected only $32.13 million in gross revenue through Sept. 20, as opposed to the $45.7 to $65 million projected for the year. The commissionable revenue, or revenue that the private collection agencies actually collected, as opposed to what taxpayers paid in response to letters indicating their cases were being turned over to the companies, was even less—$25.19 million as compared to projections of $43.5 million to $61.8 million. Based on these kind of results, the program would bring in only $250 to $320 million over 10 years. Subtract the double-digit commissions and those revenues shrink to $188 to $244 million over 10 years.
The NTEU's figures track those of the IRS commissioner and can be found in a status report I did a few months ago. link I won't repeat what I said here. The essentials are all still correct.
That same unbossed post described that pathetic attempts by the private debt collectors to build a case that they were very popular with the people they were dunning. Talk about cooking your books.
And don't forget that the Taxpayer Advocate, the person who advocates on our behalf, has been advocating ending the private debt collection program.
Recommendation:
The IRS should abandon all plans to outsource any taxpayer debts and restrict
collection activities to properly trained and proficient IRS personnel.Why IRS Should Not Outsource Debt Collections:
The Taxpayer Advocacy Panel (TAP) researched multiple sources to understand the complexity of this initiative. These sources included: the IRS, Congress, National Treasury Union, Government Accountability Office, National Taxpayer’s Union, HR5576 and ACA International web sites, and a review of National Taxpayer Advocate Nina Olson’s remarks, other news sources, and numerous TAP members with valuable taxpayer input.
Debt collection is a core function of IRS and appropriate staffing should be assigned to this function to achieve collection objectives. If IRS does not have adequate staffing, it should reduce costs by outsourcing functions that do not involve interface with taxpayers or provide opportunities for identity theft.
A TAP volunteer shared his organization’s experiences with outsourcing accounts receivable. Initially, collections improved, though at the expense of customer satisfaction. The collection agency staff did not share the same values and partnership attitudes that were practiced by the employees of the selling organization. Over time, the function of managing the contractor’s collection activities became more time consuming than handling the function internally. Overall experiences were more negative than positive.
Conclusion:
Taxpayers want and deserve a professional and congenial staff in the IRS to handle their personal tax situations and provide the funds for their government. TAP also believes limiting collections to IRS personnel provides a tremendous opportunity to improve taxpayer satisfaction and enhance confidence in their total government of the people and for the people.
Meanwhile the Tax Fairness Coalition continues advocating . . . for us taxpayers, they say.
One wonders just who they are.
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