Bill Allowing IRS Use of Private Collection Agencies Once Again in Forefront

H.R. 1169 is once again gaining attention as budget proposals for 2004 make their way through Congress. According to a story released today by the Associated Press, the Internal Revenue Service says it doesn’t have the resources to collect billions in back taxes. The agency is pressing Congress to pass a bill to allow private tax collecting agencies to do the job. The story has been picked up by a large number of national and local TV and newspaper outlets.

Last year, the Bush administration, in cooperation with the IRS, included a proposal in the 2004 budget that would give the IRS authority to hire private debt collectors to aid in recovering some $20 billion in unpaid taxes. The proposal reads as follows:

The Budget includes legislation to allow IRS to employ private collection agents (PCAs) to help collect known tax debts and to pay PCA fees from receipts. Many states and other federal agencies already use private collectors, with encouraging results. For example, Treasury’s Financial Management Service (FMS) used PCAs to collect $43 million in non-tax debts in 2002. This legislation includes strong protections for taxpayer’s rights. (The Budget for FY 2004, Pg. 239).

A number of consumer groups are opposed to the proposed legislation. Colleen Kelly used to work at the IRS. She’s now with the National Treasury Employees Union. She said there are a number of issues that need to be addressed, including privacy and economics. Other consumer groups are worried about the amount of money being paid to collection agencies for their services. The private collectors could get as much as 25 percent of what they collect.

The proposal is still being debated in committee. Currently, it is unclear whether the addition to the budget will be passed. Hopefully, bringing the story back to the public?s attention will allow members of the House Committee on Weighs and Means to conduct proper research and take a harder stance on H.R. 1169. At a subcommittee hearing in May of this year, a number of witnesses took the stand to voice their opinions on the proposal. Those in attendance speaking in favor of the bill included newly-named Commissioner if the IRS, Mark Everson, as well as representatives from ACA International, Allied International Credit, and Diversified Collection Services.

At a time when the Federal Budget is in marked deficit, all in the collection industry hope that HR 1169 gets a hard look from lawmakers seeking additional federal revenues.