3 Reasons Why Private IRS Debt Collectors Are a Terrible Idea


by Guillermo Jiminez, Tax Revolution Institute, ©2016

The IRS’s decision to revive a previously failed debt-collection program is a train wreck waiting to happen. (Photo: Mississippi Consumer Help)

(Oct. 14, 2016) — The IRS recently announced that it will soon begin using private collection agencies to go after federal tax debts. The agency released a statement on September 26 indicating that the program will launch in the spring and will seek to target cases that have gone cold for various reasons.

With these debt collection mercenaries now on the hunt, should tax delinquents across the country be shaking in their boots? Hardly.

The IRS’s move to outsource its enforcement efforts may seem like a good idea at first glance, but a closer look tells a very different tale. Here are three key reasons why the IRS’s use of private collection firms is a terrible idea:

(1) It won’t work.

Deploying private collection hounds isn’t exactly a novel concept. The IRS first tried this in 1996 and then again in 2006. It didn’t work then, and there’s no reason to think it’ll work now.

In fact, the last time it was attempted — from 2006 to 2009 — the National Taxpayer Advocate released a report noting why the program was doomed from the start:

“PCAs [private collection agencies] did not have the authority to conduct certain actions on the cases that IRS collection employees are generally able to undertake. Specifically, because these actions require the exercise of judgment and discretion and therefore are inherently governmental, PCA employees were unable to issue liens and levies or seize property; they were also not able to enter in offers in compromise or lengthy installment agreements.”

In other words, private contractors have fundamentally less authority to collect than IRS employees, and so they are naturally less effective. After an internal review of the program in March 2009, then-Commissioner Doug Shulman concluded that “this work is best done by IRS employees,” and yet here we go again.

(2) Incentivizing enforcement yields less effective, more aggressive debt collection and weakens customer service.

Getting the Internal Revenue Service out of the enforcement racket and on to business of providing actual service to the American public is certainly a worthwhile goal, and there are discussions worth having about the ways to move the agency in this direction. But that’s not what this program is.

Here, the IRS is simply contracting four companies — CBE Group, Conserve, Performant, and Pioneer — to do their dirty work for them, providing them with fewer tools to get it done, and paying them based on how much they collect.

Peter Reilly notes in Forbes that these private collectors “will by statute be compensated as much as 25% of what they collect.” The statute Reilly is referring to is the Fixing America’s Surface Transportation (FAST) Act signed into law last December — the very same law that also gave the IRS the authority to revoke passports.

The problem is that the IRS has a shoddy history of being overly aggressive in its enforcement and collection efforts. So much so, in fact, that in 1998 President Bill Clinton signed the Internal Revenue Service Restructuring and Reform Act that aimed, in part, to curb this sort of overzealous behavior. The law was specifically geared toward improving “customer service” and, in Clinton’s words, giving “the American people an IRS they deserve.”

Read the rest here.

One Response to "3 Reasons Why Private IRS Debt Collectors Are a Terrible Idea"

  1. George N. Crawford   Saturday, October 15, 2016 at 12:22 AM

    Remember your history. Tax collectors were tarred and feathered and rode out of town on a rail. Maybe we should do that to the IRS

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.