IRS Losing Millions Through Private Debt Collection

The Internal Revenue Service (IRS) calculates a net loss of over $37 million this year, thanks to its use of private debt collection agencies. IRS Losing Millions Through Private Debt CollectionBy Cliff Montgomery – May 11th, 2008The Internal Revenue Service (IRS) calculates a net loss of over $37 million this year, thanks to its use of private debt collection agencies. The program–intended to collect unpaid taxes from presumed tax cheats–has done little more than outrage U.S. citizens and waste taxpayer dollars, say Capitol Hill opponents of the privatization scheme.Beginning in 2006, the IRS has employed three debt collection agencies to gather $1 billion in unpaid taxes. Though the companies employed their standard high-pressure collection tactics, the corporations only have  rounded up about $49 million–just over half of the cost incurred by the IRS in starting the program.The debt collectors, for their part, have proudly received commissions as high as 24 percent for their services.Large Bribes–ahem, “donations”–from the private collection industry convinced the GOP-controlled Congress to begin creation of the privatization program in 2004.The three corporations which won the IRS contracts were Pioneer Credit Recovery, a New York-based firm located in the district of Rep. Thomas Reynolds (R-NY); the CBE Group, a Waterloo, Iowa-based company apparently represented by Sen. Charles Grassley (R-IA), who helped initiate the privatization program; and Linebarger Goggan Blair and Sampson, a law firm which, like George W. Bush, calls Texas home.Pioneer Credit employees have forked over $117,450 since 1995 to political action committees and congressional candidates; this includes donations totaling $16,250 to Reynolds. CBE Group employees also have been generous, doling out $9,372 over the same period, including a total of $2,500 to Sen. Grassley.Linebarger Goggan is one of America’s largest collection agencies–and one of the best-connected. The corporation, as well as various employees and their spouses, have bribed federal candidates and PACs of both parties with donations totaling $423,260 since 1995.But some congresspeople declare it’s time to end such wastefulness.”This program is the hood ornament for incompetence,” Senator Byron Dorgan (D-ND), a top critic of the current collection program, told The Washington Post in April. Sen. Dorgan has sponsored legislation to end the program.”It makes no sense at all to be turning over these tax accounts to private tax collectors that end up costing the taxpayers money,” Dorgan added.And according to the text of Dorgan’s bill, the scheme, if fully implemented, will be quite a waste. Among its problems, as quoted from the bill:- “The Internal Revenue Service intends to turn over confidential information involving over 2,500,000 taxpayer accounts to 12 private companies for debt collection purposes when its plan is fully implemented.- “Recent evidence continues to suggest that the Internal Revenue Service does not have adequate systems in place to ensure that taxpayer information shared with private debt collection companies is properly secured, and that such information will not be accessible to those who would misuse such information.- “During the initial phase of its plan, the Internal Revenue Service has agreed to pay very large commissions of 21 to 24 percent of the amount of tax debt collected by 3 private debt collection companies on cases that the Internal Revenue Service considers relatively simple.- “The use of Internal Revenue Service employees to collect [this] tax debt would cost only 3 cents for every dollar collected, while the use of private debt collectors would cost almost 25 cents for every dollar collected.- “The Internal Revenue Service failed miserably when it attempted a similar tax debt collection privatization plan in 1996 and found that private debt collectors harassed many taxpayers, violated Federal debt collection laws, and did not properly secure sensitive taxpayer information as required by law.”Though Dorgan’s bill was referred to the Senate Finance Committee in early 2007, it has sat there for well over a year. But if these findings are correct, it’s surely time for the Senate to give this bill another look.Like what you’re reading so far? Then why not order a full year (52 issues) of thee-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!