IRS will end private debt collection program

The Internal Revenue Service announced last week that after conducting an extensive review of the private debt collection program, including the cost effectiveness of the effort, it will not renew its contracts with two private debt collection agencies. A contract with a third company had already expired.

"After a thorough review of this program, I have decided not to renew the contracts," IRS Commissioner Doug Shulman said in a statement. "I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources."

Shulman also said that the decision was in no way based on concerns over the performance of the two contractors affected, who performed according to the terms of the contract throughout. "I have asked IRS officials to ensure that the ramp down is orderly, and that the IRS perform targeted outreach to any displaced contractor employees that would consider applying for positions at the IRS," Shulman said.

Sen. Charles Grassley of Iowa, the senior Republican on the Senate Finance Committee, disagreed with the results of the IRS review, the Associated Press reports. He said the IRS used flawed methods to review the program and succumbed to public employee unions and their allies.

"It seems the IRS and Treasury Department went out of their way to knock out an emerging, effective, and evenhanded way to collect tax debt that the IRS will otherwise never collect," Grassley said, according to the AP. "It's discouraging when commonsense efforts to make things fair for honest taxpayers in a way that's decent and logical all around get beat down by vested, powerful interests in Washington."

Ending the program is considered a victory for the National Treasury Employees Union who had argued that the IRS could do a better job than private agencies if given the funds to hire more agents. Shulman said that the IRS intends to hire over 1,000 new collection employees in this fiscal year ending September 30.

Other critics of the program included Congressional Democrats who expressed concerns about taxpayer rights and the Taxpayer Advocate who questioned the program's cost effectiveness.

The IRS initiated the program in 2006. Congress approved a measure permitting the use of private contractors in 2004.

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