Scuttle IRS Debt Collection Program Says National Taxpayer Advocate

IRS National Taxpayer Advocate Nina Olson added the latest bit of resistance to the IRS’ private debt collection plans yesterday in her annual report to Congress.  The report – more than 600 pages long and delivered a mere 4 months after the program began (juxtaposition intended) – calls for Congress to scrap the plan and let IRS employees collect the past-due dollars, just as they always have(n’t).

The annual report covered many areas of performance at the IRS and made wide-ranging recommendations, from addressing the Alternative Minimum Tax to closing the tax gap.  But the specific recommendation to scuttle the private debt collection programs has grabbed the headlines.

Olson claimed that the IRS’ use of private collection agencies (PCAs) is inefficient and that it’s simply not working.  She says, “Unlike other federal agencies, the IRS has a nearly $2 billion collection budget with thousands of collection employees. In contrast, PCAs at this stage of the initiative are using 75 employees to collect on these accounts, and the IRS is using 65 employees to monitor them. The IRS with its vast resources can do what 75 PCA employees can do.”

As Stephen Barr points out in a great column running in today’s Washington Post, that claim is fairly misleading.  He says, “There are 65 IRS employees who work ‘as needed,’ but the time they are putting in is only equivalent to 31 full-time workers.” This, according to Barr, appears later in the report.

The program has already collected more than expected in its infancy, and there are plans on the table to expand the program from the three current collection contractors to 12.  So why all the pushback?

It appears that budgetary battles are afoot at the IRS, Treasury Department, and nearly every other government agency.  In fact, Stephen Barr’s column linked above is titled “Tax Collection Debate Is a Product of Budget Battles.”  And the first recommendation put forth by Olson in her report falls under the title Revising Congressional Budget Procedures to Improve IRS Funding Decisions.