Consumer Groups Call for Support to End IRS Private Collection Program

Privatized IRS Tax Collection, we hardly knew ye.

Though ostensibly still alive and kicking (if one man down), the prognosis continues to be poor for the IRS’s program to use private debt collection agencies to pursue unpaid back taxes.

H.R. 695, co-sponsored by Reps. Chris Van Hollen (D-MD) and Steve Rothman (D-NJ); and S. 335, co-sponsored by Sens. Byron Dorgan (D-SD) and Patty Murray (D-WA), are both cruising along with significant bipartisan support with the goal of ending the IRS’s program.  (H.R. 695 has garnered 66 co-sponsors, including seven Republicans, since it was introduced on January 24.)

One of the harder working advocates against the private debt collectors is the office of the National Taxpayer Advocate.  Nina Olsen of the NTA recently released her agency’s annual report to Congress. Olsen’s argument is that the IRS has the resources to take care of collecting back taxes internally.

The report further damns the 109th Congress for not completing their appropriation bills on time. Congress has the option to give IRS more funding to collect unpaid taxes. The IRS did not request such funding in the FY 08 budget proposal, and nearly $100 million was cut from the enforcement budget at the IRS in the FY 07 joint funding resolution.

Ultimately, the NTA’s – and, actually, pretty much everyone else against the IRS’s collection program – main beef against private collection agencies is the thing that everyone hates about private collection agencies: the fact that they’re collection agencies. The expressed (and, frankly, misguided and incorrect) fear is that the entire industry has no scruples, no oversight, and no interest in doing its job while complying with the law. Many worry that private collection agencies may have occasion and motive to take advantage of taxpayers who owe smaller debts, many of whom are elderly or disabled. Others believe that IRS would handle these cases more efficiently and with less risk for the privacy rights of the taxpayer.

It’s an interesting PR conundrum when the IRS is seen as more people-friendly than you. And yet, highly publicized abuses in the collections industry might be what finally taps the last nails into the coffin of what could have been potentially a vital part of the IRS’s tax collection program.