IRS use of private debt collection could end soon

Some recent developments point to the possible elimination of the IRS's use of private debt collection agencies in the not too distant future.

After much debate, the IRS awarded contracts to three private debt collection agencies in April, and the program officially began in September.

But the program may not last long.

At the end of September, the Government Accountability Office released a report, which stated that the IRS plans to evaluate the program before determining if it will expand it in January 2008. However, the report indicated that the IRS does not plan to include the cost of paying private debt collectors in its program evaluation.

"The study design indicates that [the] IRS will not count the fees paid to [private debt collection agencies] as program costs," the GAO said in its report. Instead, the "IRS will subtract these fees from the tax debts collected and report the net dollars collected."

The report also found that the Service hasn't documented how it intends to ensure the success of the debt collection program.

"As a result, the IRS risks not providing complete information decision makers would find useful," the GAO report said.

The new Democratic majority in Congress is widely expected to attempt to eliminate the program entirely. The House previously voted to block funding for the debt collection program as of Oct. 1, but the Senate has yet to take action on the measure.

Sen. Max Baucus, D-Mont., the new chair of the Senate Finance Committee, has said that the GAO findings support his belief that private debt collection won't save taxpayers money in the long run.

The GAO report is entitled, "IRS Needs to Complete Steps to Help Ensure Contracting Out Achieves Desired Results and Best Use of Federal Resources."