In Washington, DC yesterday, a panel of collection industry professionals, government department heads and consumer rights advocates gave testimony before the House Subcommittee on Ways and Means to determine whether private collection agencies should be allowed to collect back taxes on behalf of the IRS. CollectionIndustry.com?s Content Manager and editorial chief, Patrick Lunsford, was there and filed this report.
In a hearing called by Chairman Amo Houghton (R-NY) to discuss a bill introduced by Houghton, the House Committee on Ways and Means, Subcommittee on Oversight heard testimony yesterday from three different panels concerning the proposal to allow the IRS to use private collection agencies. The panelists included IRS Commissioner Mark Everson, appearing before his first House subcommittee since his appointment, Rozanne Anderson from ACA International, Dexter Smith from Allied International Credit Corp., Jon Shaver with DCS Inc., and representatives from various federal and state departments and consumer groups. Members of the subcommittee in attendance were Houghton, Earl Pomeroy (D-ND) and Mark Foley (R-FL).
One of the key issues in the proposal is the fact that the IRS has not gotten its full funding request in eight of the last 10 years. And, as it is in the middle of an aggressive program to modernize its computers and restructure itself to meet growing taxpayer service demands, it has been forced to “poach” workers from its enforcement arm for other duties, IRS Commissioner Mark W. Everson said yesterday. The result of this shift in job duty is apparent: the agency carries on its books some $280 billion in unpaid back taxes. This figure has more than doubled from the outstanding amount of $130 billion in 1992. Of that $280 billion, the IRS figures $78 billion to $80 billion is actually collectible. This reflects a growth of 12% over what was figured to be collectible just two years ago.
Currently, about 38 percent of the collectible amount is in “inactive status” ? meaning that the taxpayer has either agreed it is due or on which the taxpayer has made at least three installment payments and stopped ? because the IRS lacks the manpower to go after it.
Under the administration proposal, about $13 billion of this would be referred to private collection agencies, which would contact the taxpayers and demand payment. The agencies would be empowered to enter into limited installment payment arrangements, but otherwise have no discretion to negotiate with a taxpayer or evaluate the merits of a case. The collection agencies would be working on a contingency basis, collecting a fee up to a ceiling of 25 percent under Houghton’s bill.
Most who gave testimony yesterday seemed to be in support of the idea of using private collection agencies to collect IRS back taxes. Everson, the first witness to speak, lauded the administration?s efforts to help his agency bring in more money while taking work off of his employees? plates. ?We must use all, repeat, all, available tools at our disposal to collect these taxes?, Everson said in his testimony.
Nina Olson, National Taxpayer Advocate, said that this proposal ?is constitutional and correct? but added that the collection agencies ?would be very closely monitored by her office? should the proposal pass. Pamela J. Gardiner, the acting Treasury inspector general for tax administration, echoed Olson?s sentiment and added that the language of the proposal should be re-examined to ensure consumers’ rights. Rozanne Anderson, General Counsel and SVP for Legal and Governmental Affairs with ACA International, had concerns about the language in the bill concerning contract awards by the IRS. Currently, the bill calls for 10 agencies to be considered for contract to collect taxes, with 2 spots being held for small business. To ensure fairness to small collection agencies, Anderson proposed that the language be changed to reflect no limit on the number of agencies working IRS accounts.
Dexter Smith and Jon Shaver, both from private collection agencies, pressed the need for the government to have access to the best and most efficient technology and operations processes. In the area of debt collection, clearly the highest benchmarks are set by the private sector. Shaver added that concerns about agencies? actions, i.e. harassment of debtors, could be quelled when the FDCPA is taken into consideration. Since the framework for fair debt collection is already in place, agencies working IRS accounts would police themselves under the same auspices they already do with the FDCPA.
