IRS ends private debt collection

Should the taxman call to “tell you how it will be,” at least you’ll know it’s a fed.

That’s because the Internal Revenue Service terminated its controversial outsourcing of tax collection Thursday. An agency program review found tax debt collection was cheaper and more lucrative when performed by federal employees.

IRS commissioner Doug Shulman said:

IRS employees have more options available to them to resolve difficult collection cases

Contracts with two private debt collection firms expired March 6. The agency will hire 1,000 new tax collectors in fiscal 2009 to target collection on areas of greatest need. IRS will recruit displaced contractor employees to fill openings. Shulman said:

By investing in IRS employees to perform this collection work, we can be assured that we have all the tools available for helping taxpayers confronting complex situations.

The program’s demise ends years of controversy over private debt collection.  Congress, the National Taxpayer Advocate and the National Treasury Employees Unions long argued private collectors cost more and brought in less than federal employees.

House Majority Leader Rep. Steny Hoyer, D-Md., praised the IRS decision in a statement:

Now that we have the facts, ending this wasteful policy – which has come at great cost to taxpayers – and putting the job of tax collection back with the trained professionals at the IRS is the right thing to do.