After Extensive Review IRS Will Not Renew Private Debt Collection Contracts

The IRS, in a news release (IR-2009-19) issued March 5, announced that after it had conducted an extensive review of the private debt collection program, including the cost effectiveness of the effort, it will not renew its contracts with two private debt collection agencies.

The IRS determined that the work is best done by IRS employees who have more flexibility handling cases, which is particularly important with many taxpayers currently facing economic hardship. The current one-year contracts expired March 6. “After a thorough review of this program, I have decided not to renew the contracts,” IRS Commissioner Doug Shulman said. “I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward.” Shulman also noted that the IRS anticipates hiring over 1,000 new collection personnel in FY 2009.

The study, supported by an independent review, showed that it is reasonable to conclude that when working similar inventory, IRS collection is more cost effective than the contractors. IRS employees have a range of options available to them in attempting to resolve difficult collection cases that, by law, the private contractors do not have.

“In these challenging economic times, I have asked all IRS employees to go the extra mile to help financially distressed taxpayers,” Shulman said. “IRS employees have more options available to them to resolve difficult collection cases.” Shulman also said that the decision was in no way based on concerns over the performance of the two contractors affected, who performed according to the terms of the contract throughout.

Sen. Charles Grassley (R-Iowa) said March 5, “The administration has decided that after spending nearly a trillion dollars in the stimulus bill to keep people working across the country, they are going to cut a program that provides jobs to hundreds of people during the middle of a recession, including 60 in Iowa,” Grassley said in a statement.

Grassley has argued that the collection program should be given a chance to work.

Grassley March 4 urged the Senate, the Treasury Department, and IRS to save the program despite efforts by the Senate Democratic leadership to cut off debate and allow no amendments to a $410 billion omnibus spending bill.

Grassley, ranking member of the Senate Finance Committee, had filed an amendment that would have stricken a provision in the House-passed bill (H.R. 1105) to prohibit IRS from using any 2009 appropriations to fund the private debt collection program.