By George L. Yaksick, Washington Staff Writers
Dating back to 2006, the federal government has been using private collection agencies to help the IRS recover back taxes on undisputed claims. The use of these agencies has angered Democratic lawmakers and their union supporters who believe that government workers should be doing it instead. Program supporters say the initiative is collecting money that would never have been collected without it.
To gauge the effectiveness of the program, the IRS is now auditing the workload of the collection agencies that are participating. One interim report is now completed, and another is in the works.
A recent audit of fees paid by the IRS to private collection agencies has revealed no real problems, the Treasury Inspector General for Tax Administration (TIGTA) has reported. TIGTA is also conducting a separate report about the overall initiative.
Private Contractors
The IRS originally contracted with three private collection agencies, The CBE Group, Inc., Waterloo, Iowa; Linebarger Grogan Blair & Sampson, LLP, Austin, Texas; and Pioneer Credit Recovery Inc., Cascade, N.Y., to work taxpayer accounts in September of 2006. Linebarger Grogan Blair & Sampson ended its participation in the initiative in March of 2007, leaving The CBE Group and Pioneer Credit Recovery as the current participants.
When the IRS launched the initiative, it reported that the private collection agencies would handle simple cases and ones in which the taxpayer did not dispute the liability. According to TIGTA, the IRS had $7.7 billion in delinquent tax debt classified as potentially available for the implementation phase of the initiative. Approximately $5.5 billion was "low-priority" workload, likely eligible for placement with private debt collectors.
A spokesperson for the Tax Fairness Coalition, of which the two collection agencies currently under contract with the IRS are members, said that the initiative has recovered $37.5 million since September of 2006, from taxpayers who otherwise would not have been contacted by the IRS. Another $7.75 million is being collected through installment payments.
Fees
Between September 2006 and April 2007, the IRS processed 18 invoices, containing more than 6,000 expense transactions, from the three contractors totaling approximately $2.7 million, TIGTA reported. TIGTA audited a sample of the invoices and determined that the fees were accurate, supportable and allowable. Minimal discrepancies were subsequently remedied by the IRS.
Overall Evaluation
TIGTA also reported that its staff is performing an overall evaluation of the initiative to measure its performance and evaluate its effectiveness. The overall evaluation will also examine IRS oversight of the program, contractors' compliance with laws and procedures and taxpayers satisfaction with the program.
Controversy Continues
The results of the overall evaluation, if positive, are sure to be touted by supporters as evidence of the program's success and, if negative, by opponents as signs of its flaws. During its short life, the initiative has sparked heated controversy on Capitol Hill. Opponents came very close to terminating the program last autumn when the House voted to cut off future funding. However, they were unsuccessful in inserting a similar ban in the omnibus FY 2008 appropriations bill, the Consolidated Appropriations Act, 2008.
Supporters of the initiative have a powerful ally in Sen. Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee. Several times in 2007, Grassley helped to turn back proposals in the Senate or deflate House actions that would have ended the initiative.
- Related items:
- Collection Agencies Recover $24 Million in First Year of IRS Privatization Initiative
- IRS Outlines Taxpayer Protections in Private Debt Collection Program
- IRS Outsources Some Debt Collection Activity
Posted January 14, 2008.
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