Short-staffed IRS wants private debt collectors
By Jonathan Weisman
Washington Post
WASHINGTON — Struggling with rising workloads and stagnant staff levels, the Internal Revenue Service walked away from more than 2.2 million delinquent tax accounts last year, totaling nearly $16.5 billion, according to the Treasury Department.
In written answers to questions from the Senate Finance Committee, Deputy Treasury Secretary Samuel Bodman used the escalating delinquencies to renew a Bush administration push to bring private debt collectors into the IRS tax collection process. Many of the scofflaws would pay up if they were simply contacted by telephone, Bodman said.
"Fundamental fairness requires ... we have an effective program to collect outstanding tax liabilities," he said. "We owe that much to the millions of Americans who do their best to pay their fair share."
The median size of the delinquent accounts was $14,000. The largest account not being pursued was over $50 million. "These taxpayers are aware of their outstanding tax liability," Bodman said. "The IRS, however, is unable to continuously pursue each taxpayer with an outstanding tax liability."
According to government documents, the amount of money the IRS knowingly left on the table last year equaled 1.8 percent of the total individual and corporate income tax take expected for 2003. It could have fully covered the U.S. space agency's 2004 budget or the government's international aid programs.
The IRS vowed last year to clamp down on tax cheats, and the number of shelved accounts in 2003 was slightly lower than in 2002. But the dollars lost jumped by $619 million. President Bush has requested an IRS budget for 2005 of nearly $10.7 billion, a 4.6 percent increase that in part would fund 2,942 additional enforcement employees, according to administration budget documents.
But few expect that to improve enforcement significantly. Former IRS Commissioner Charles Rossotti said before his 2002 retirement that the agency needed 35,000 additional workers to pursue just those cases it is aware of.
Bush is pursuing an alternative — private debt collectors. And Congress appears ready to try.
Greg Jenner, the Treasury Department's acting assistant secretary for tax policy, said the private agencies would be restricted to contacting taxpayers who know they owe money. They would not be empowered to place liens on income or seize assets.
Treasury has estimated the plan would bring in $1.5 billion in payments between 2005 and 2014, a sliver of the total delinquencies. But Jenner said that was an extremely conservative estimate.
"The last thing we wanted to do was overstate this and create too high expectations," he said.
The plan is strongly opposed by the National Treasury Employees Union, which represents IRS employees and wants the agency to increase its payrolls instead. Many Democrats are also skeptical. A pilot program employing private collectors in 1997 failed when IRS computers were unable to match the agencies with the appropriate delinquent accounts.
