Could the IRS pass Tax Debt to Collection Agencies?

Only a few years after the IRS made a decision to stop using private collection companies for collection of outstanding federal taxes, this topicĀ  was raised again by the Chairman of Senate Finance Committee Ron Wyden in his Expiring Provisions Improvement Reform Act. This extenders bill, if approved, will force the IRS to delegate some of the tax collection actions to the private debt collectors, a practice that, according to the IRS, already failed twice since 1996.

The requested modification obligates the IRS to involve private companies in collection of taxes from those taxpayers whose accounts have been placed into inactive status for one of the following reasons: the IRS failed to find the taxpayer, did not have enough resources to proceed with collection, or simply did not contact the taxpayer for a year after a delinquent account was assigned to the IRS collections.

Although this measure seems to be an attempt to help the IRS to retrieve the debt and to free up a large number of the IRS employees who can then become available for other tasks, the IRS officials believe that implementing this strategy will be more harmful than beneficial. The president of the National Treasury Employees Union, Colleen M. Kelly, stated that Congress should not force the IRS to use this option because it already cost the US government millions of dollars in a past. Nina Olson, National Taxpayer Advocate, agreed with Kelly, in her 2013 Report to Congress, and emphasized the fact that the IRS agents collect 62 percent more in taxes than private collection agencies.