Senators Ask IRS to Review Outsourced Collection Program

U.S. Sens. Byron Dorgan (D-N.D.) and Patty Murray (D-Wash.), yesterday asked new Internal Revenue Service Commissioner Douglas H. Shulman to immediately review what they described as the “ill-advised” IRS program of using private collection agencies to collect taxes.

In a letter to Shulman, Dorgan and Murray note, “We believe if you look objectively at the program’s operations, its costs far exceed any claimed benefits.”

Opponents and proponents to the program quickly responded to the letter.

“The serious concerns expressed in their letter, ranging from improper or illegal collection practices to the waste of substantial taxpayer dollars, reflect the growing opposition to this program, both from members of Congress and from within the IRS itself,” Colleen M. Kelley, president of the National Treasury Employees Union, said in a prepared statement.

The NTEU claims the program has resulted in a loss of $50 million to the Treasury in its first year of operation and isn’t expected to break even until fiscal 2010. Taxpayer Advocate Nina Olson, an IRS employee and an opponent of the program, said in recent House testimony the program could result in as much as $500 million in foregone federal revenue over the next six years.

A spokesperson for an organization representing the collection agencies currently working for the IRS said the opposition’s remarks were the same-old, same-old.

“This is nothing new really,” said Jeff Trinca, spokesperson for The Tax Fairness Coalition, which represents the two firms, CBE Group and Pioneer Credit Recovery, a division of SLM Corp., or Sallie Mae.

“The Treasury Inspector General’s report – in stark contrast to the IRS – has given the program strong marks,” Trinca added. “The non-partisan Joint Committee on Taxation – the only organization with an official say in it – continues to hold that the program nets substantial revenue for the federal government, over $500 million over 10 years.”

Dorgan was one of 17 Senators in January that asked for a review of Shulman’s views on the privatization program before Shulman was confirmed as commissioner (“Senators Press to End IRS Privatization Program,” Jan. 30).

Trinca noted that Shulman testified to the Senate Finance Committee that he was committed to implement the privatization program as long as Congress authorizes him to do so. The Senate approved Shulman as commissioner in March.