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US House Committee To Probe Private Tax Debt Collection

by Leroy Baker,, New York

28 March 2007

House Ways and Means Committee Chairman Charles Rangel has urged the Internal Revenue Service (IRS) not to award any new private tax collection contracts this year, after hearing numerous complaints from taxpayers concerning violation of privacy.

Rangel made his request in a letter to IRS Commissioner Mark Everson, in which he also announced a Ways and Means Committee investigation into the overall use of private companies to collect federal income tax debts.

“We have heard too many complaints and concerns about the tactics used by private debt collectors to allow the IRS to issue new contracts,” explained Rangel, adding:

“We need to investigate these violations to ensure that we are protecting the privacy and dignity of taxpayers, not enabling harassment by these private companies.”

In his letter, Rangel said he was most concerned about reports that private collection firms have violated taxpayer privacy laws. "We are aware of at least one serious violation of law that the IRS Complaint Panel has validated," he wrote.

Rangel is also concerned about provisions of the code which state that the federal government "shall not be liable for any act or omission of any person performing services under a qualified tax collection contract".

"Given the Committee's current investigation of the program and my intent to have legislation enacted this year to repeal or significantly modify the authority granted under Code section 6306, I strongly urge that you not proceed with the process of awarding new private collection contracts this year," Rangel wrote.

The IRS plans to award three to five additional contracts in October 2007, with the procurement process due to start next month.

The IRS was granted authority to institute a private collection program in 2004 under Internal Revenue Code section 6306. The IRS had three collection firms under contract from September 2006 to March 2007. However, only two of those contracts have been extended, and the cases pending before the third contractor have been recalled.

According to Rangel, Commissioner Everson has previously testified before Congress that the use of private collection companies is more costly than using trained IRS professionals.

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