NCPA - National Center for Policy Analysis

IRS Considers Using Private Collection Agencies to Gather Back Taxes

October 15, 2002

Tax deadbeats may find themselves being hounded by professional debt collectors under a plan being considered by the Internal Revenue Service for next year.

  • Some $240 billion in back taxes is owed -- with an estimated $50 billion of that considered collectible over the next 10 years.
  • The agency is still considering whether the private collectors should be paid a flat fee or be allowed to keep a percentage of the money they collect.
  • Accounts are put in the uncollectible category if the debtor has died or doesn't have sufficient funds to pay.
  • A 1998 law required the IRS to fire personnel who harass taxpayers -- and since then about 50 agents have been dismissed, with another 100 or so resigning under fire or retiring.

Agents complain that the law has tied their hands. The law has produced huge backlogs in compromise settlement offers from taxpayers, many for pennies on the dollar.

Agents say that prior to passage of the law, a seasoned officer could collect more than $1 million a year in back taxes. But now the figure is a fifth or a third of that.

The plan to privatize the debt collection process faces two difficulties. The union which represents IRS workers is opposed to even studying the plan, and taxpayer advocates worry private collectors could trample the rights of individuals by harassing them into paying bills that -- given the IRS's record-keeping difficulties -- they might not even owe.

Source: John D. McKinnon, "IRS Weighs Using Debt Collectors to Get Back Taxes," Wall Street Journal, October 15, 2002.

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