IRS hires private firms to collect back taxes

Agency adds safeguards to ensure security, privacy of information

IRS hopes to shrink its $300 billion backlog of delinquent taxes with private collection services that began last week. Tax collection, until now, had been done only by agency personnel.

The contracted services began amid funding hurdles from Congress and criticism from the National Treasury Employees Union, which represents IRS employees. IRS reduced the number of customer service representatives so it could hire more skilled workers for tougher enforcement cases.

IRS will implement the private debt collection program very carefully so it is on sound footing, said IRS commissioner Mark Everson. The IRS has assigned the collection agencies 12,500 delinquent taxpayers, which will reach 40,000 by year-end.

'Congress gave us this tool, and I'm going to do everything I can to get every nickel that's owed to the government. We are working hard to protect taxpayer privacy and taxpayer rights,' he said.

Over 10 years, the IRS expects private firms to help it collect $1.4 billion in outstanding taxes.

IRS has assured that the collectors' systems meet the most stringent standards, said Deborah Gascard Wolf, director of the Filing and Payment Compliance Modernization Project Office.

'The PCAs [private collection agents] will only have access to a limited stream of data selected for them. ... They will not receive tax returns,' she said.

The IRS will use the initial version of its Filing and Payment Compliance System to support the private collectors. The inventory management system scores nonfiler and overdue cases, separating complex cases that require direct IRS employee involvement from those the contractors can handle.

The inventory management system will prioritize and assign cases, provide data exchange, and update files between the IRS and the private collections agencies, the IRS said in its Privacy Impact Assessment for the system.

The IRS will own and control the data. Debt collectors will receive only necessary elements from the IRS Individual Master File, such as name, address, taxpayer identification number or Social Security number, delinquent tax period, filing status and balance due.

IRS also has instituted an online audit trail on every case accessed by a user. And it will maintain quality review and contractor performance records, including allegations of misconduct made by taxpayers against the contractor's employees.

Legislation authorizing the IRS to hire private collection firms, the American Jobs Creation Act of 2004, contained the same privacy provisions for contractors that IRS employees work under. The IRS added more privacy safeguards, an IRS-directed training program for collection agents and company guidelines, including background checks.

The fiscal 2007 House Treasury Transportation bill, however, prevents the IRS from using those funds on the program. The Senate has not acted on its version.

By moving ahead with the program, the IRS has disregarded Congress, said Rep. John Olver (D-Mass.), a member of the House Appropriations Committee.

Everson said he will act as Congress directs.

About the Author

Mary Mosquera is a reporter for Federal Computer Week.


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