WASHINGTON -- The Internal Revenue Service told lawmakers Tuesday it can't go after every overdue tax bill and needs help from collection professionals who specialize in making persistent phone calls.
The sum of uncollected taxes is mounting faster than tax collectors can handle. Private agencies would only pursue a small portion of the $78 billion in potentially collectible debt. The IRS said about $13 billion is owed by taxpayers who can and will pay, if someone asks.
The agency wants eventually to place 2.6 million cases a year with private companies, aiming for people who dodge the tax collector and assume that the IRS is too busy to track them down.
"They are taking advantage of the fact that the IRS cannot continually pursue each taxpayer who fails to pay an outstanding tax liability," agency commissioner Mark Everson said at a House Ways and Means subcommittee hearing.
Subcommittee chairman Amo Houghton, R-N.Y., introduced a bill to give the IRS authority to draw up the contracts. "We're trying to solve a problem. We don't have the money to do it right now," he said.
Like the tax bill advancing through the Senate, Houghton's bill would give the IRS authority to hire outside agencies to collect unpaid taxes and to keep up to 25 percent of the money they collect.
$1 billion net
The IRS will not hand over any of its enforcement powers to private companies. Congressional tax experts estimate the program will net $1 billion to the Treasury over the next decade.
Some lawmakers say it would be less costly and more efficient to give the IRS more money to hire their own collectors. Referring to a Pentagon spending controversy in the Reagan administration, Rep. Earl Pomeroy, D.-N.D., said: "This is the $600 toilet seat of tax collection."
Government boards that oversee the IRS endorsed the idea but warned that the agency must protect taxpayers' privacy and improve its record of overseeing contractors.
The IRS' taxpayer advocate offered a stern warning that her office will watch the program closely.
"I have a level of discomfort with the concept of using private collection agencies based on my earlier professional experiences" representing taxpayers in states that use them, said taxpayer advocate Nina Olson.
Some tax professionals, consumer advocates and IRS union officials strongly oppose the plan and say the IRS can collect the debt itself if Congress would give it the budget and staff to do the job.
"This scheme is costly, risky and would lead to a gross invasion of the privacy of American taxpayers," said Colleen Kelly, president of the National Treasury Employees Union.
The Treasury Department said the companies will be told to ask nicely and not badger or frighten taxpayers. Such behavior can get an IRS employee fired.
"I want to stress in the strongest possible terms that (private collectors) would be prohibited from threatening or intimidating taxpayers," Everson said.
The IRS needs Congress to approve the program because current law prohibits anyone other than a government employee from collecting taxes. Twenty-three collection companies have already shown interest in participating.
If approved, the companies would contact anyone who filed a return showing a balance due but not paid, and anyone who made three or more payments on an installment plan and stopped paying.
The collection agency would send a letter to the taxpayer, then follow with a phone call. The bill collector could not contact family members, neighbors or employers to track down taxpayers who had moved. Taxpayers would be asked to pay their bills in full or agree to pay in installments for up to three years.
Rozanne Andersen, representing the credit and collection industry, told lawmakers the program will not succeed if the IRS should turn over only old and stale accounts with no chance of collection.
"I would remind you that in order for the project to be successful, the collection agencies must have an opportunity to make money," she said.
On the Net
IRS taxpayer advocate: www.irs.gov/advocate