IRS Will Miss March 4 Deadline For Contracting With Private Debt Collectors

Yesterday Internal Revenue Service Commissioner John Koskinen testified before the Senate Committee on Finance. Among many topics addressed in this hearing was the recently passed FAST Act provision to reinstate the use of private debt collectors within the IRS.

In early December 2015 President Obama signed into law the Fixing America’s Surface Transportation Act (FAST Act). This Act included a provision requiring the IRS to use private debt collection companies. At that time, insideARM posted an overview of the Act’s provisions, and the history of past IRS private debt collection initiatives.

Many in Congress, the National Treasury Employee’s Union, and others, oppose this initiative but nonetheless, the Act requires that the IRS begins entering into contracts within three months of the date of the Act’s enactment, or March 4, 2016 (although there is no specific timeframe required for the placement of accounts, except “soon thereafter”). During Commissioner Koskinen’s testimony yesterday, he noted that his Agency would miss that deadline.

“We’re going to do everything we can to get the program up and running as quickly as we can. We [are planning] a bidders conference this month. Within the 90 days we are committed to providing a timeline as to when the program would actually be up and running and implemented. The bidders conference is to get us started. Our goal – if we can pull it off – is to learn from mistakes and give it the best chance to succeed. As it stands now in the normal procurement process plus developing the program we expect to have contracts with those acceptable collectors before the end of this fiscal year.” He also reminded the Committee that “this is yet another unfunded mandate, but we’re going to do it anyway.”

Chuck Grassley (R-Iowa) – who has been a long-time supporter of the Private Debt Collection initiative - countered, “It seems to me you’ve already got people there you can contract with who are already in that business.” Koskinen countered with a litany of objections, at which point Grassley appeared frustrated and agreed to move on to another topic.

Indeed, the delay will not be surprising to anyone who reads Koskinen’s prepared testimony (which, by the way, is quite an interesting read from the perspective of a taxpayer). While the Agency had a budget of $11.2 billion in FY2016, there has been a steady decline in its workforce – an estimated total decrease of 17,000 since 2010, including a reduction of over 5,000 enforcement personnel. These dwindling human resources are being spread over an increasing number of critical initiatives, including implementation of the Affordable Care Act, combating identity theft and tax fraud, and endless efforts to modernize the IT infrastructure.

insideARM Perspective

While reading and listening to the testimony, I can’t help but draw a parallel between the challenges of the IRS and the challenges of the debt collection industry. Just to start…

• By definition, nobody views a debt collection interaction as a positive thing. Likewise, it’s hard to have a warm and fuzzy feeling about the IRS. In both cases, the best you can hope for is a pleasantly efficient and/or helpful experience. Yet both institutions are essential to a properly functioning U.S. economy.
• Both the IRS and the debt collection industry struggle to modernize communications with consumers within the confines of privacy requirements and outdated laws.

What an interesting public-private partnership this could be if the two groups could work together to discuss and find solutions for these shared challenges.