IRS is Outsourcing Debt Collection Again

By on October 11, 2016 in Agency News with 0 Comments

Final demand notice for debt, past due and overdue payment

The Internal Revenue Service has announced plans to begin private debt collection of certain overdue federal tax debts as early as spring of 2017.

The four private agencies awarded the contract include Conserve (Fairport, New York), Pioneer (Horseheads, New York), Performant (Livermore, California), and CBE Group (Cedar Falls, Iowa).

National Treasury Employees Union National President Tony Reardon has told Congress that rather than hire private contractors, the IRS should retrain the more than 7,000 employees who process paper returns and are slated to lose their jobs as more taxpayers file electronically.

On September 14, the IRS announced that approximately 1,800 employees in Covington, Ky., 3,000 in Fresno, Calif., and 2,400 in Austin, Texas, would have their jobs phased out between 2019 and 2024.

This is the third time the IRS has attempted to outsource debt collection after trials in 1996-1997 and 2007-2009 resulted in failures.

In 2004, Congress passed the American Jobs Creation Act, which granted the IRS authority to contract out collection of past due taxes to private collection agencies (PCAs). That effort lasted for nearly three years from 2007 to 2009.

A study produced by the IRS after that effort found that the IRS collected about 62 percent more than the PCAs ($139.4 million compared to $86.2 million collected by the PCAs).

Despite poor performance by private debt collection agencies, Congress instructed the IRS in 2015 to try again by including language in Section 32102 of the Fixing America’s Surface Transportation Act (FAST Act).

Under the law, the IRS must designate contractors to collect, on the government’s behalf, outstanding inactive tax receivables.

According to the IRS, as a condition of receiving a contract, these companies must respect taxpayer rights including, among other things, abiding by the consumer protection provisions of the Fair Debt Collection Practices Act.

Private collection agencies will work on accounts where taxpayers owe money, but the IRS is no longer actively working them. Several factors contribute to the IRS assigning these accounts to private collection agencies, including older, overdue tax accounts or lack of resources preventing the IRS from working the cases.

The IRS will give taxpayers and their representative written notice that the accounts are being transferred to the private collection agencies. The agencies will send a second, separate letter to the taxpayer and their representative confirming this transfer.

The agency will be monitoring the performance of the private companies and is warning the public to be on the lookout for scams from individuals falsely claiming to represent the government or falsely claiming to be employed by one of these four contractors.

Your take: Should the IRS use private collection agencies? Share your feedback in this short survey

The 2013 IRS report on private debt collection is included below.

The IRS Private Debt Collection Program a Comparison of Private Sector and IRS

© 2016 Michael Wald. All rights reserved. This article may not be reproduced without express written consent from Michael Wald.


About the Author

Michael Wald is an independent economics analyst and writer based in the Atlanta area. He specializes in topics related to business, labor, and human resources. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.