By George Yaksick, CCH Staff Writer, and John L. Duoba, Toolkit Staff Writer
In an effort to reduce costs, the federal government is considering the outsourcing of many non-essential governmental activities to private-sector enterprises willing to bid on the work. Hiring companies that already excel at certain duties would lower government costs to taxpayers by reducing payroll and benefits, logistical and lodging/travel expenditures, and various overhead expenses. And with the costs of outsourcing generally less than completing the work in-house, if the service is at least comparable if not better, it's a win-win for all involved.
Or so you would think. But there is one loser in this scenario--the government's public-sector labor unions.
And so the battle lines are now being drawn over the federal government's latest effort at efficiency: outsourcing the collection of some federal tax debts.
In March of 2006, three private collection agencies were awarded contracts by the IRS: The CBE Group of Waterloo, Iowa; Linebarger Goggan Blair & Sampson, LLP, of Austin, Texas; and Pioneer Credit Recovery, Inc., of Arcade, N.Y. Since the IRS first awarded the contracts, agency officials have repeatedly--and loudly--promised that the private debt collectors will respect taxpayer rights and privacy.
"We have carefully considered all of the concerns expressed about this project, which involves work traditionally done by the government. As a result, we are putting tough safeguards in place to protect taxpayer rights and privacy. We will be closely monitoring contractor performance to make sure they're following the law as well as our own internal standards," IRS Commissioner Mark Everson said back on March 9.
An IRS spokesperson also said that the IRS "currently plans to assign cases beginning in late August or early September" and added that "final details are still being worked out." He noted that "Congress directed the IRS to go ahead with the private debt collection program in the 2004 American Jobs Creation Act. The IRS is continuing toward that goal."
Private collection agencies will initially be assigned cases in which the taxpayer does not dispute the liability, according to the IRS. "Future case assignments are expected to include higher dollar cases as well as business cases," the IRS said in a questions and answers column about privatization on its web site.
In addition, private collection agencies must operate within strict codes of conduct under the Fair Debt Collection Practices Act. The law limits, for example, when debt collectors can contact taxpayers (generally not before 8 a.m. or after 9 p.m.). Collectors also cannot use abusive tactics to pursue a debtor.
IRS Workers Unhappy
Meanwhile, the union representing IRS employees is working hard to defeat the initiative, expressing concerns about privacy and cost issues, lobbying lawmakers to kill the effort, and urging taxpayers to drop out of the program.
According to the National Treasury Employees Union (NTEU), which represents IRS employees, taxpayers may be hearing from private debt collectors about their tax bills as early as the end of August. "Taxpayers whose cases are turned over to the debt collection companies will be informed of their new status via a letter from the IRS," NTEU President Colleen Kelley said in a written statement.
In its announcement, NTEU referred to an agency message to IRS employees. The first 40,000 taxpayer files will be turned over to private debt collectors on August 31, NTEU reported.
"If you already paid the balance due on your account and believe you received the letter from the IRS stating that your overdue tax account had been assigned to a collection agency by mistake, call the IRS number shown on the letter to contact the IRS customer service unit that works with private collection agency issues," NTEU reported.
According to Kelley, IRS managers have told employees to "limit their response to taxpayer questions to merely confirming that their accounts have been turned over to a private collector." Additional taxpayer questions should be directed to the private collection agency.
Kelley criticized the lack of taxpayer communications. "It's outrageous that IRS employees are being told to refuse to answer any questions posed by an American taxpayer about his or her taxes owed," Kelley said.
Taxpayers who encounter problems with debt collectors should contact the National Taxpayer Advocate, the Federal Trade Commission and their state attorney general, NTEU said.
At the same time, NTEU is questioning how cost-effective private debt collectors will be. The union highlighted an August 20, 2006 article in The New York Times, which Kelley described as "right on the mark" about the high costs and dangers to taxpayer rights of privatization.
"The article points out that no one in the IRS has yet to effectively dispute the data advanced by former IRS Commissioner Charles Rossotti that it would be much more cost-effective to use IRS employees to pursue these taxes," NTEU said.
"The newspaper said that while the government probably would net $1.1 billion over 10 years from private debt collectors, that amount is only a tiny fraction of the $87 billion that could be collected over the same period if the IRS hired additional revenue officers, as recommended by former Commissioner Rossotti," according to NTEU.
Rossotti, appointed by then-President Bill Clinton, served as commissioner of the IRS from 1997 until 2002; in May of 2003, Everson began serving his five-year term as commissioner.
Kelley also criticized the IRS for moving forward with privatization after the House has voted to prohibit the IRS from using any of its Fiscal Year (FY) 2007 appropriations for private debt collection. The Senate version of the FY 2007 IRS appropriations bill does not include that prohibition.
"The arrogance of the IRS in pushing forward with this misguided and costly program in the face of Congressional efforts to halt it is beyond belief," Kelley said.
The differences in the House and Senate FY 2007 IRS appropriations bills will be ironed-out by a conference committee.
In the meantime, the union's leaders are reminding taxpayers that they can opt-out of having their IRS accounts serviced by a private collection agency. Under law, taxpayers may instruct a private collection agency to return their account to the IRS for service, NTEU said. Instructions must be in writing and a copy of the letter should be sent to the IRS. The private collection agency is responsible for returning all of the taxpayer's records and information to the IRS.
NTEU has published a sample letter on its web site at www.nteuIRSwatch.org.
- Related items:
- IRS Releases First Fact Sheet To Address Business Income Tax Gap; More To Come
- IRS Reports $345 Billion in Taxes Went Unpaid for 2001 Tax Year
- Taxpayers' Failing Grade on Tax Topics Could Be Costly: Survey
- IRS Programs Come Under Fire
- New Tax Year Means Many Tax Changes to Consider
Added to the news on September 5, 2006.
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