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Economic News, Data and Analysis

IRS Outsourcing Debt Collection

This seems like it could have the potential for a very bad outcome… (Anyone want to take bets for when taxpayer information is first misused?).
The argument for doing this is that it might be cheaper to collect unpaid taxes through a private company. But since the IRS will have to do quite a bit of oversight – it seems like there would be a lot of wasted resources dealing with all the issues that might arise. (E.g. what’s to prevent these companies from targeting specific groups?)
This seems like a core function of the IRS, and it should be done in-house, not farmed out.

Chron.com | IRS Awards First Debt Collection Contracts
By MARY DALRYMPLE AP Tax Writer
� 2006 The Associated Press
WASHINGTON — The nation’s tax collectors announced Thursday that three companies will help collect unpaid tax debts.
The firms, chosen from 33 applicants, will help the Internal Revenue Service collect money from taxpayers who agree they owe taxes but haven’t paid. As much as $7.7 billion in unpaid taxes could be eligible for assignment to a private debt collector, debts the IRS does not have the resources to collect itself.
Congress in 2004 gave the IRS authority to contract debt collection to private companies. The tax agency plans to expand the limited trial, which will be under way this summer, to as many as 10 companies in 2008.
[…]
Concerns about taxpayer privacy have been expressed by some lawmakers, consumer advocates and the labor union that represents IRS employees.
[…]
The companies can track down taxpayers to request payment. If the debt cannot be paid in full, the company can set up a payment schedule up to 5 years long. Taxpayers would submit the money to the IRS. The law allows debt collectors to be paid as much as 25 percent of the taxes collected.
[…]
The firms are The CBE Group Inc., in Waterloo, Iowa; Linebarger Goggan Blair & Sampson LLP in Austin, Texas; and Pioneer Credit Recovery Inc. in Arcade, N.Y.

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Filed under: Economics

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