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IRS Reverses Course On Collections

Kelly Phillips ErbMarch 7, 2009May 16, 2020

Internal Revenue Service (IRS) Commissioner Doug Shulman has announced that the IRS will not renew its contracts with two private debt collection agencies. Those contracts expire this year.

You may recall that I was not a fan of turning over collections matters to private companies. Like many other tax professionals, I had concerns about the tactics used by commercial debt collectors, including the real possibility that those collectors might not advise taxpayers of their rights and alternatives. I was skeptical of the rates of return using private companies and the effect that turning over collections work to private companies might have on Offers in Compromise, Installment Plans, and Appeals. Most disturbing, however, were issues related to taxpayer privacy; though the agencies were allegedly screened, at least one of the agencies involved in the initial collections plans had already been investigated for misconduct.

The IRS anticipates hiring over 1,000 new collection personnel in 2009. They had hoped to do this in prior years but Congress turned them down, despite studies that showed a projected $1.1 billion in collections from private companies versus $87 billion from IRS Revenue Officers. Instead of hiring new collections personnel, Congress forced the IRS to resort to private companies who collected fewer dollars at a higher cost to taxpayers. And we wonder why the country is operating in the red…

The Commish swears that the ramping up of collections personnel does not signal a shift away from the kinder, gentler IRS that we’ve been promised. Shulman said:

In these challenging economic times, I have asked all IRS employees to go the extra mile to help financially distressed taxpayers. IRS employees have more options available to them to resolve difficult collection cases.

Let’s hope so. Call me crazy but I think effectively enforcing collections rather than raising taxes would go a long way towards balancing the budget.

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Kelly Phillips Erb
Kelly Phillips Erb is a tax attorney, tax writer, and podcaster.
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3 thoughts on “IRS Reverses Course On Collections”

  1. LJ says:
    March 7, 2009 at 2:26 pm

    Let them start collections from all the politicians and all the previous politicians….

    Reply
    1. Kelly says:
      March 7, 2009 at 10:38 pm

      That’s kind of my point – if we went after the worst offenders, it would make a difference.

      Reply
  2. TaxRascal says:
    March 9, 2009 at 9:42 am

    As I understand it, they were using private collection agencies as a last resort, when their traditional tactics didn’t work. So I think investing more in the tactics that don’t always work is not a great plan. Instead, a minor private tax collector reform would make this a fairer profession, and one that let us use more diverse techniques to collect on back taxes.

    Reply

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