Private Tax Collectors Decreasing IRS Revenue

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Private Tax Collectors Decreasing IRS Revenue

By Credit Federal | Published 03/15/2008

The private collection agencies the IRS hired to recover money from overdue taxpayers, is resulting in $81 million less annually than if the IRS itself sought out delinquent income tax payers.

Now the IRS is reconsidering its hiring of private collection companies.

The original purpose of hiring private collection agenices was to get the taxes due from taxpayers who owed less than $25,000 and who didn't dispute the debt. Two private firms, keeping up to 24% of what they recover, have collected roughly $43 million so far, according to the IRS.

The cost of administering the program, combined with the amount the private firms keep, leaves the IRS with $11 million in net annual revenue. If the work were instead handled by IRS employees through the tax agency's Automated Collection System, annual net revenue would total approximately $91.8 million.

Acting IRS Commissioner Linda Stiff told the panel IRS employees would continue working on more complex tax cases; not pick up the work handled by private firms, even if Congress revoked the program's authorization. As a result, Stiff said, the IRS would lose the amounts now being collected each year by the private firms.

Subcommittee reaction broke down along partisan lines, reflecting the Washington standoff that has blocked any changes in the collection program.

Endorsing Olson's arguments, Rep. Bill Pascrell said the privatization effort was an "ideologically driven" program and "a waste of taxpayers' money." The IRS employee union agreed, arguing the program also poses a security risk to taxpayer data. But Rep. Jim Ramstad said analyses by non-partisan groups have been more supportive of the program. The Tax Fairness Coalition, a group representing the private collection firms, said the program is on pace to surpass the IRS' projection of $23 million in gross revenue for this federal fiscal year. "All the objective evidence points to the fact that it's working," Ramstad said.

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Private Tax Collectors Decreasing IRS Revenue - by <a href=http://creditfederal.com>CreditFederal.com</a> <div style="text-align: left; font-family: Verdana;">The private collection agencies the IRS hired to recover money from overdue taxpayers, is resulting in $81 million less annually than if the IRS itself sought out delinquent <a href="http://creditfederal.com/free-online-tax-return-filing.html">income tax</a> payers. Now the IRS is reconsidering its hiring of private collection companies. The original purpose of hiring private collection agenices was to get the taxes due from taxpayers who owed less than $25,000 and who didn't dispute the debt. Two private firms, keeping up to 24% of what they recover, have collected roughly $43 million so far, according to the IRS. The cost of administering the program, combined with the amount the private firms keep, leaves the IRS with $11 million in net annual revenue. If the work were instead handled by IRS employees through the tax agency's Automated Collection System, annual net revenue would total approximately $91.8 million. Acting IRS Commissioner Linda Stiff told the panel IRS employees would continue working on more complex tax cases; not pick up the work handled by private firms, even if Congress revoked the program's authorization. As a result, Stiff said, the IRS would lose the amounts now being collected each year by the private firms. Subcommittee reaction broke down along partisan lines, reflecting the Washington standoff that has blocked any changes in the collection program. Endorsing Olson's arguments, Rep. Bill Pascrell said the privatization effort was an "ideologically driven" program and "a waste of taxpayers' money." The IRS employee union agreed, arguing the program also poses a security risk to taxpayer data. But Rep. Jim Ramstad said analyses by non-partisan groups have been more supportive of the program. The Tax Fairness Coalition, a group representing the private collection firms, said the program is on pace to surpass the IRS' projection of $23 million in gross revenue for this federal fiscal year. "All the objective evidence points to the fact that it's working," Ramstad said. </div> This article provided courtesy of <a href=http://creditfederal.com target=_new>www.CreditFederal.com</a>, a personal credit resource of good or bad credit credit cards and loans.

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