GAO Urges Closer Oversight Of Private Tax Collectors

The Internal Revenue Service must improve oversight of a new program that uses private agencies to collect back taxes before it expands the effort, congressional investigators say.

A Government Accountability Office report commended the IRS for addressing some important factors for the success of the program, such as proper training of collection-agency employees, ensuring that taxpayers are treated properly and that taxpayer information is secure.

But it said the agency has not completed critical work on setting goals and determining costs.

The IRS lacks criteria to assess "whether the program performance warrants expanding the number of private collection agencies and turning over more cases to them," the report says.

Critics of the program said yesterday that the GAO report supported arguments that the tax agency was moving quickly to incorporate an unworkable program.

"I've been concerned all along about the use of private contractors to collect federal taxes," said Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee. Baucus and committee chairman Charles E. Grassley (R-Iowa) requested the GAO study.

"Tax collection is an inherent government function, and the IRS ought to take care of it in house," Baucus said.

The IRS, responding to legislation, initiated the private debt collection program in September, contracting with three companies. The IRS plans to expand the program to up to 12 private agencies, with a goal of collecting $1.4 billion in back taxes over the next decade.

The report cited preliminary IRS data showing that the three companies expected to collect $56 million to $92 million through the end of next year, at a cost of $61 million. Under the program, the private agencies are entitled to up to 24 percent of the tax money they collect.

The IRS program, said Colleen M. Kelley, president of the National Treasury Employees Union, "is a direct handout to the private sector, which won't generate an appreciable return to the Treasury and will cost taxpayers money."

IRS Commissioner Mark W. Everson, in a statement responding to the GAO report, said he agreed with the recommendations to set more concrete guidelines for the program and said that the agency had begun to carry out those recommendations.

As part of the effort to prevent scams, taxpayers first receive a letter from the IRS that includes the name of the company that will be contacting them about the debt. The firms receive basic background information on the taxpayer but do not have access to tax returns.