IRS To Use Private Debt Collectors To Gather Back Taxes

by Mike Godfrey, Tax-News.com, Washington

27 February 2003

The US Internal Revenue Service is planning to use private debt collection firms to pursue some 2.6 million taxpayers, who currently owe around $13 billion in back taxes.

According to a report from Dow Jones Newswires, the tax agency released a memo to companies interested in participating in the venture earlier this month. However, the proposal cannot officially move forward until Congress passes legislation allowing the IRS to contract some of its tax collection duties out to private firms.

'We're trying to get the industry to understand the size and scope of what we're talking about,' Brady Bennett, director of strategy and finance for the IRS's small-business and self-employed division explained to the news service.

Concerns have been expressed at the possibility of taxpayer information being placed in the hands of private debt collection companies. However, collection agencies are utilised by other state and federal agencies, and according to Mr Bennett, contractors will not be permitted to contact third-parties such as taxpayers' employers or banks without specific written authorization from the IRS.

Dow Jones Newswires revealed that although the tax agency has predicted that the initiative will get off to a slow start, it is expected that:

'In the 2004 fiscal year, the proposal would generate $46 million in revenue, but then jump to $128 million in 2005, according to the Treasury Department. After that, the project would generate between $94 million and $113 million a year.'

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