House panel to look into IRS' use of private tax collectors

National tax advocate urges IRS to drop private tax collectors

Congress plans to investigate the Internal Revenue Service’s use of private collection agencies to collect back taxes. The IRS, meanwhile, should not award any new contracts for private tax collectors this year, said Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, which oversees the IRS.

In a letter to IRS Commissioner Mark Everson, Rangel strongly urged Everson not to proceed with the IRS’ anticipated three to five more contracts in October. The procurement process starts next month.

Taxpayers have complained about the methods those currently providing collection services for the tax agency use, Rangel said in the letter last week.

At the same time, regulations absolve the IRS of liability for acts by the private tax collectors under the contracts. Contract employees may engage in collection tactics that are prohibited for use by IRS employees, Rangel said. Commissions for the private collectors are based on the amount of tax monies they collect, another process that is not allowed for the IRS’ evaluation of its employees.

“We need to investigate these violations to ensure that we are protecting the privacy and dignity of taxpayers, not enabling harassment by these private companies,” Rangel said.

The IRS, which received authority to use private tax collectors in 2004, had three collection firms under contract from last September 2006 to this month. Two of those contracts were extended and the cases pending before the third contractor have been recalled.

Everson previously testified before Congress that the use of private collection companies is more costly than using trained IRS professionals.

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