Tax collection made easy? 

By Peter Morton

Taxpayers in the US better watch out —Uncle Sam is calling in reinforcements. The Internal Revenue Service has been given congressional blessing to hire private debt collectors in a bid to recover US$1.2 billion of the billions it is owed by tardy taxpayers.

As part of a sweeping 3,300-page Jobs Creation Act signed into law late last year, the IRS will be allowed to hire as many as 10 collection agencies, which will keep 25% of each dollar collected.

“We do view this as an important step forward in strengthening tax administration,” says IRS commissioner Mark Everson. “It parallels what is already being done in more than 40 states. It will be done with full protection of taxpayer rights, and it’s absolutely necessary, particularly in an environment where Congress has cut back on funding for the IRS.”

The IRS, which has been limited in resources for collecting outstanding debts, will put the program in place over the next year. “We’re always looking for ways to maximize our collection effort,” says Nancy Mathis, an IRS spokeswoman.

Collectors will initially go after individuals by phone to arrange a payment plan, but the IRS is coy on what it will do if a tax-payer refuses to go along. A similar project in 1996, which was dropped because it cost more to hire outside help than what was being brought in, limited private collectors to tracking down errant taxpayers for a flat fee, leaving the collecting up to the IRS.

The Canada Revenue Agency says it has no plans to use private collectors to obtain any of the $17 billion it is owed. Colette Gentes-Hawn, speaking for the agency, says it would take a change in Canadian legislation for the agency to use outside collectors since privacy of taxpayers is “sacrosanct. It is the heart of our self-assessment system.”