The nation’s tax collectors announced Thursday that three companies will help collect unpaid tax debts.
The firms, chosen from 33 applicants, will help the Internal Revenue Service collect money from taxpayers who agree they owe taxes but haven’t paid. As much as $7.7 billion in unpaid taxes could be eligible for assignment to a private debt collector, debts the IRS does not have the resources to collect itself.
Congress in 2004 gave the IRS authority to contract debt collection to private companies. The tax agency plans to expand the limited trial, which will be under way this summer, to as many as 10 companies in 2008.
IRS Commissioner Mark Everson said many states use private companies to collect unpaid taxes. “Redirecting relatively simple cases to private firms will permit the IRS to focus its existing collection and enforcement personnel on more complex tax issues,” he said.
Concerns about taxpayer privacy have been expressed by some lawmakers, consumer advocates and the labor union that represents IRS employees.
“Taxpayers deserve much better than this program,” said National Treasury Employees Union President Colleen Kelley. “Their personal, sensitive and private information should not be divulged by our government.”
Companies with contracts for debt collection will get some basic information about taxpayers and the size of the tax debt. The companies are required to abide by federal debt collection laws, state laws and IRS rules protecting taxpayer privacy.
“These organizations are highly regulated, and each individual debt collector, as well as the company itself, are subject to the Fair Debt Collection Practices Act,” said Rozanne Andersen, general counsel and senior vice president of legal and government affairs at ACA International, a credit and collection industry association.
The companies can track down taxpayers to request payment. If the debt cannot be paid in full, the company can set up a payment schedule up to 5 years long. Taxpayers would submit the money to the IRS. The law allows debt collectors to be paid as much as 25 percent of the taxes collected.
Debt collection employees are subject to background investigations, and the employees must comply with federal tax laws. All work must be done in the United States.
Employees who disclose taxpayer information illegally could be charged with a felony, punishable with fines and imprisonment. Looking at taxpayer information without authorization could also be punished.
Contractors cannot use any information gleaned during a tax collection to pursue other unpaid debts.
The IRS plans to write the training curriculum for private companies and monitor the quality of their work. Government auditors have also been tracking the program.
The firms are The CBE Group Inc., in Waterloo, Iowa; Linebarger Goggan Blair & Sampson LLP in Austin, Texas; and Pioneer Credit Recovery Inc. in Arcade, N.Y.