By Martin H. Bosworth
ConsumerAffairs.com
March 11, 2009
The Internal Revenue Service (IRS) is looking to expand its ranks and bring in more employees, after electing to end the controversial practice of outsourcing debt collection to private firms.
The Private Debt Collection (PDC) plan, begun in 2006, was championed by the Bush administration as a way of making government more efficient through privatizing non-essential functions. The PDC plan enabled private debt collection companies to pursue uncollected back taxes, and to keep as much as 25 percent of the collected fees.
But the plan was terminated on March 5, according to IRS Commissioner Dennis Shulman, who said that in the current economic crisis, IRS in-house employees "had more flexibility" than private contractors in working with struggling taxpayers.
"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.
Shulman anticipated hiring as many as 1,000 new employees to help with collection efforts and negotiate with taxpayers. "By investing in IRS employees to perform this collection work, we can be assured that we have all the tools available for helping taxpayers confronting complex situations," he said.
The PDC was estimated to have brought in $80 million for the government during its three years of operation, but it was also criticized for costing more than comparable public operations, and for allowing collectors to use abusive tactics such as threatening phone calls, many of which were illegal.
As early as November 2006, the Government Accountability Office (GAO) had reported that the IRS was not properly accounting for the costs of the program, and that it would lower any revenue brought in without oversight or controls, and the IRS began slowing its initial efforts to outsource the collection programs to make sure employees had proper training and security clearances.
A later study commissioned by the IRS and performed by the MITRE Corporation found that while every dollar brought in through collections cost the IRS $.07 cents, using private contractors cost $.24 cents per dollar collected.
The National Treasury Employees' Union (NTEU) hailed the decision as a victory, citing their long opposition to the PDC. "This result, a long time coming in the face of growing opposition to the program, is not only a good decision by the IRS, it is the right decision," said NTEU president Colleen Kelly.
