The Pros and Cons of IRS Collection Outsourcing

When President Bush signed into law the American Jobs Creation Act of 2004 last October, one industry in particular had cause to celebrate new career opportunities: America’s debt collectors.

The bill authorizes the Internal Revenue Service to contract with private collection agencies to help whittle down $78 billion in potentially collectable debt. The IRS estimates that $13 billion of that is “low-hanging fruit,” fully adjudicated and uncontested cases owed by taxpayers who can and will pay up. The IRS simply doesn’t have the time or resources to chase down these debtors. Private collectors will likely make time for the job; those chosen to do the IRS’s legwork stand to keep up to 25 percent of what they collect.

But IRS outsourcing is not going to happen overnight. If all goes as anticipated, the IRS will solicit requests for proposals in late 2005, identify a vendor or vendors in the spring of 2006 and begin outsourcing some collection activity in 2007.

Outsourcing was not the agency’s first or favorite choice to tackle its collection backlog. IRS Commissioner Mark Everson had asked Congress for a modest increase in funding that he estimated could return $9 billion to the public coffers. The funding wasn’t forthcoming, and President Bush instead suggested outsourcing.

For this complete story, please visit The Pros and Cons of IRS Collection Outsourcing.