IRS May Turn Over Collections to Private Agencies

If the U.S. Senate has its way, the Internal Revenue Service may be able to use private collection agencies to help recover the approximately $13 billion in unpaid taxes that is lingering in the hands of the nation's taxpayers.

The tax cut bill that is due to be voted on in the Senate next week contains a provision enabling the IRS to seek outside help with collections. The IRS has reduced its collection efforts in recent years due to cutbacks in budgets and staffing.

Detractors fear throngs of unbridled collection agents spreading through the general populous, equipped with the ability to strongarm taxpayers to an extent not permitted by IRS agents. "The very notion of unleashing an army of private bill collectors on this country ought to give us pause," said Representative Earl Pomeroy (D-ND).

Others express concern over the potential cost of paying outside collectors. A similar program that was tested in the 1990s produced only $3.1 million in collections and the fees paid to those who collected the taxes were also $3.1 million.

Senators supporting the measure claim they have added enough safeguards to protect taxpayers from inappropriate intrusions, including:

  • Collection agents would not be able to contact employers or acquaintances of taxpayers
  • A three-year time period would apply to approved payment programs
  • Particularly difficult cases would stay with the IRS for collection
  • Payment to the collection agency would be based on more than just a percentage of the amount collected. Other factors in determining the collection agency fee would include quality of service and taxpayer satisfaction.

The House of Representatives plans to debate this issue next week.

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