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IRS Kills Private Debt Collection Program
March 6, 2009
The IRS put the final nail in the coffin of their private debt collection program by opting not to renew the contracts of two collection agencies currently recovering back taxes.
The Internal Revenue Service said Thursday that it has decided against renewing the contracts of two debt collection agencies that had been recovering back taxes for the government for three years.
“After a thorough review of this program, I have decided not to renew the contracts,” IRS Commissioner Doug Shulman said in a statement. “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 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. “I have asked IRS officials to ensure that the ramp down is orderly, and that the IRS perform targeted outreach to any displaced contractor employees that would consider applying for positions at the IRS,” Shulman said.
CBE Group, based in Waterloo, Iowa, and Pioneer Credit Recovery of Arcade, N.Y. were the two collection agencies that were working on the contract. The current contract expires Friday.
The IRS anticipates hiring over 1,000 new collection personnel in the current fiscal year to fill the void. These new employees would give the IRS the flexibility to make assignments based on the areas of greatest need rather than filtering which cases can be worked using contractor resources.
The announcement marks the end of a battle that has raged ever since the program was announced in 2003.
Both critics and proponents of the program have been very vocal over the past several years. Several high-ranking Senators from both sides of the aisle, business groups, and even the IRS at one point championed the private debt collection initiative as a program that helped to reduce the tax gap – the difference in what Americans owe and what they pay – and provide jobs. Opponents, including the National Treasury Employees Union and the National Taxpayer Advocate, have argued that the IRS can do the work themselves and protect Americans’ sensitive personal information more effectively.
And the war of words did not end after the announcement.
“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,” Sen. Chuck Grassley (R-Iowa) said in a statement. "It's hard to believe that after worrying so much about keeping people employed, the administration has chosen this route.”
Sen. Richard Durbin (D-Ill.), praised the announcement, saying tax collection was a core goverment function. "Until private debt collectors can prove they can do the job better, do it more efficiently and do it at a lower cost than the IRS, there is no reason we should continue this program," he said.
“After a thorough review of this program, I have decided not to renew the contracts,” IRS Commissioner Doug Shulman said in a statement. “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 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. “I have asked IRS officials to ensure that the ramp down is orderly, and that the IRS perform targeted outreach to any displaced contractor employees that would consider applying for positions at the IRS,” Shulman said.
CBE Group, based in Waterloo, Iowa, and Pioneer Credit Recovery of Arcade, N.Y. were the two collection agencies that were working on the contract. The current contract expires Friday.
The IRS anticipates hiring over 1,000 new collection personnel in the current fiscal year to fill the void. These new employees would give the IRS the flexibility to make assignments based on the areas of greatest need rather than filtering which cases can be worked using contractor resources.
The announcement marks the end of a battle that has raged ever since the program was announced in 2003.
Both critics and proponents of the program have been very vocal over the past several years. Several high-ranking Senators from both sides of the aisle, business groups, and even the IRS at one point championed the private debt collection initiative as a program that helped to reduce the tax gap – the difference in what Americans owe and what they pay – and provide jobs. Opponents, including the National Treasury Employees Union and the National Taxpayer Advocate, have argued that the IRS can do the work themselves and protect Americans’ sensitive personal information more effectively.
And the war of words did not end after the announcement.
“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,” Sen. Chuck Grassley (R-Iowa) said in a statement. "It's hard to believe that after worrying so much about keeping people employed, the administration has chosen this route.”
Sen. Richard Durbin (D-Ill.), praised the announcement, saying tax collection was a core goverment function. "Until private debt collectors can prove they can do the job better, do it more efficiently and do it at a lower cost than the IRS, there is no reason we should continue this program," he said.
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Comments
Comment from Anonymous on March 6, 2009 at 12:02PM EST
I thought they did prove they could work it better with outside agencies?
Comment from Larryq on March 6, 2009 at 12:07PM EST
Dear Senator Durbin,
The Department of Defense is a core government funtion. Are they going to start building their own tanks and jets now? The collection industry has already proven that they can collect money more effectively and efficiently. We do not have to justify our existence when every large corporation in the country finds an important place for our industry in their accounts receivable. As long as the government tries to do this job without us, the deficit between what is owed and what is collected will continue it's astronomical growth. Always has, always will. But, hey, if what you have always done has never worked, that is surely no reason to actually institute a change. Politics is such a sad business...
Comment from Anonymous on March 6, 2009 at 12:11PM EST
I believe this is the first of future actions that the current administration will try to enact against our industry.
Comment from Anonymous on March 6, 2009 at 12:15PM EST
Why does Washington think that they need to pander to the approximately ten percent of the population that that doesnt pay their bills instead of the roughly ninety percent who do? Hey Washington stop pandering to deadbeats. As a member the ninety percent I am offended.
Comment from Anonymous on March 6, 2009 at 12:19PM EST
This is yet another farse to imply that the stimulus plan is working. The Obama adminsistration will announce 1,000 new jobs. What they will fail to announce is those who worked at CBE and Pioneer who lost them because the governement choose to use a higher cost, less efficient solution.
Comment from Anonymous on March 6, 2009 at 12:27PM EST
I have seen this happen many times. Big business or government will outsource what they cannot efficiently handle. They learn how to do it their-self from the source that is doing the work. They also learn who the key persons are in the organizations.
With the knowledge in hand and the well trained employees on board, they take the business back. This is sad, however it is a fact!
Comment from Anonymous on March 6, 2009 at 12:27PM EST
We as a nation have become soft. Core values have whithered; the fabric of our society is unraveling. It is time we ALL accept responsibility ... government, businesses and consumers. We accept responsibility for our and our kids education. We accept responsibility for our actions, conduct. And we accept responsibility for our commitments, debts. We as a nation need to become strong again .. each of us needs to step up .. and ALL should be held accountable. Public sentiment excusing some, many from accountability in all areas is a slippery slope and we are in free fall. Many have become reliant on the government to provide money, housing, insurance, debt relief, and much, much more. It is time accountability is restored, and reliance on government be abolished. We have lost our way. ALL need accept the mantra "The buck stops here" ... own up or get out of the way. Step up people!
Comment from Anonymous on March 6, 2009 at 12:31PM EST
Just another example of misguided judgment and rediculous government growth. The new administration is turning America into a european-type government and economy. After just a few weeks I'm sickened by what is happening to our country. There is rapidly becoming less and less of a reason to be an entreprenuer.
Comment from Anonymous on March 6, 2009 at 12:33PM EST
Why are we debating "virtual union jobs" that will never be funded at the expense of REAL jobs for real people? The IRS "automated collection system" was built in the 70's and doesnt come close to being functional for collecting bills and IRS will never put people on these small balance accounts, contrary to their claims and rationale for replacing PCAs.
Comment from smiller on March 6, 2009 at 12:38PM EST
What Larryq said is dead on the money. This is nothing more a leftist administration and congress trying to swell the roles of government employees and hey, if they can punish small business at the same time, then all the better,right?
Comment from J.D on March 6, 2009 at 12:44PM EST
The killing of this program was done by a collection company, the congress just did the dirty work.
Comment from Anonymous on March 6, 2009 at 12:52PM EST
We don't need politicians in Washington, we need business professionals - and we all know the politicians are not business professionals. They've all got their own pet projects and/or a lobbyist in their back pocket. Seems like every politician is focused on what's best for their state or them personally, they don't consider the big picture. Until we, the voters, stop putting these individuals in positions of power, we've only ourselves to blame and nothing will change. Nancy Pelosi flys on private planes every weekend and WE pay for it - our auto execs get crucified for one trip to Washington. What's wrong with this picture?
Comment from Anonymous on March 6, 2009 at 1:04PM EST
Most people in this country are honorable hard working stand up citizens who are dragged down by a small percentage of loafers, scammers, and deadbeats. Washington, stop pandering to them most of them are to selfish and lazy to vote anyway.
Comment from ProSmallerGov on March 6, 2009 at 1:44PM EST
Another example of the current administration's goals for creating bigger government! Lower cost and greater efficiency does not seem to carry much weight in this decision process! Those current on their taxes will pay the price...but higher cost of operation is such a drop in the bucket compared to the spending spree this administration is on!
Comment from Anonymous on March 6, 2009 at 1:53PM EST
I wonder how many "lawmakers" in Washington, are actual debtors on these collection agencies books? Is this another way to keep quiet about how many have not paid their taxes?
Comment from steamboat on March 6, 2009 at 2:30PM EST
1,000 new jobs at the IRS = 1,000 new members of National Treasury Employees Union sounds like political paybacks to me.
Comment from BHVBBAD on March 6, 2009 at 3:56PM EST
Will the government announce it's liquidation rates before and after taking this work back?
Comment from skiptraceannie on March 6, 2009 at 6:07PM EST
Okay listen the only thing will happen it that they will collect for awhile and realize they can not handle then outsource to a foreign country like India,Phillipines and those countries with call centers. My husband worked for Wells Fargo Bank call center they sent 9 people to the Phillipines to train at the call center for a month kept telling employees jobs were safe they were expanding after they open the center they waited for about 30 days laid off the trainers and let the other portion of call center go. He then got a job with Blue Cross and they did the same identical thing so he went back teaching now layoffs this shows government cares nothing about us at all then you bail out banks that use cheap out of country labor,
Comment from Anonymous on March 6, 2009 at 6:54PM EST
Others have said it perfectly, the gov'mnt needs to have business professionals not politicians. They're going to hire 1000 people to do the same job 150 were doing between the 2 agencies, cannot wait to see what kind of liqs they produce!
Comment from Mr KLC on March 6, 2009 at 1:07AM EST
Makes me wonder about the future of the US Department of Education contract.
Comment from PublicSrvcMsg on March 6, 2009 at 1:34AM EST
1000 new IRS collectors, earning $15-21 hr with all the gov't perks of the job. I too doubt they are going to spend that much to collect outstanding taxes, they would have already. Visit their career site, they are only hiring collectors in Washington state at this time, $15-21 hr.
Comment from PublicSrvcMsg on March 6, 2009 at 1:38AM EST
Maybe they should open sattellite IRS collection agencies in every state. That would be one way to collect taxes and ad jobs to more than just Washington. Not that we need another collection agency in NY, but it wouldn't hurt everywhere else.
Comment from Anonymous on March 7, 2009 at 12:21PM EST
Providing 1,000 more jobs is a good thing. My concern is not how many more jobs the IRS is providing; rather if they are literate enough on the laws pertaining to debt collection to train the new personnel effectively.
We in the collections industry have invested a substantial amount of our time and money on keeping up with the ever changing laws that allow us to follow the laws to the letter.
How is it that the IRS is going to hire, pay salaries and benefits, pay in-house expenses related to covering their new personnel in such areas as workman's compensation, and provide ongoing training more efficiently than outsourcing to agencies that have a proven track record of maintaining compliance?
Comment from DONALD DALY on March 7, 2009 at 6:30PM EST
DOUG SHULMAN HAS CONFIRMED THAT THIS ADMINISTRATION WILL GROW GOVERNMENT EVEN THOUGH IT FLYS IN THE FACE OF COMMON SENSE AND FISCAL RESPONSIBILITY. HE WANTS 1,000 THIS YEAR BUT THAT WILL ONLY BE THE TIP OF THE ICE BERG. JUST ANOTHER FORM OF WELFARE (GOVERNMENT EMPLOYEES) FOR THE MIDDLE CLASS OF THIS COUNTRY TO CARRY. IT WILL BE DONE BECAUSE THEY CAN GET AWAY WITH IT, SAD!
Comment from star on March 9, 2009 at 8:49AM EST
If this is what we can expect from the Obama administration, then I do not foresee a recovery plan in the near or distant future....really SAD!!
Comment from ATaxMan on March 9, 2009 at 9:36AM EST
I assist people with tax problems. The IRS is making the correct move here by dumping private collection in favor of adding IRS personnel. The collection agencies were hamstrung and I regularly advised people to tell the collector to refer the case back to IRS which they had to do. The REAL problem is not enough collectors at the IRS where a case often reaches 8 years of age before serious collection efforts take place. There is no better collection person on the planet than an IRS Revenue Officer as thousands of taxpayers can affirm. We should double the size of the IRS Collection Staff and collect what is due.
Comment from JC on March 10, 2009 at 2:23PM EST
The government already has a working model in place for a successful private collections contract, the Dept of ED. The politicians want you to think that they fear for tax payer privacy. What it really boils down to is adding more government union employees.
Comment from Larryq on March 11, 2009 at 8:55AM EST
Sorry, ATaxMan, but the rule was stupid that allowed you to delay the collection process. An IRS agent collects less than one third of the dollars per hour of the AVERAGE professional collector. You would have to triple the force of the IRS to get similar results but, you would see almost no results for the first 6 months while this new staff was trained. By the way, think about that average for a minute. First party collection, including ALL voluntary payment to the IRS, and their agents collect 1/3 of an average professional collector per hour. "There is no better collection person on the planet than an IRS Revenue Officer..." Sorry, the evidence indicates that their results rank at the very bottom. Sorry, literally billions of dollars in uncollected taxes are mounting due to their utter lack of skill. Amazingly, ATaxMan, you prove the point better than I can, since you "regularly advise people to tell the collector to refer the case back to the IRS." If, your client was going to be able to stall the professionals easier than they can stall the IRS Revenue Officer, this would not be your approach.
Comment from bwilson@wcscredit.co on March 21, 2009 at 3:02PM EST
the contract was flawed by allowing consumers to opt out of the collection agency, that is why the irs is canceling because they ended up doing all the work and the agencies were getting paid anyway. The agency should have been granted all the powers afforded the irs collector and then on a level playing field the private collector would have dominated. the thing i find funny is the government has all the tools available when it comes to their money, but when it comes to the consumer owing anyone else they are on the side of the consumer, if collection laws had the teeth the irs had we would not be in the financial mess we are in because people would pay their bills.
Comment from John on November 2, 2009 at 3:11PM EST
Next step: THE PUBLIC OPTION offered to businesses nationwide to outsource their collections work to the gov't. I guarantee they can beat the prices of every agency in the nation. Why? No profit and Loss statement. The Fed Reserve can print them money when they need it. You know, like the post office, Amtrak, and any other gov't run "business."
The OPTION would put all agencies out of business based on it being "cheaper." Recovery Rate and efficiency? Well, why worry about such things...but boy is it cheap.