Research: Private Debt Collection Program Can Fund Hundreds of New IRS Jobs

The public-private partnership between private collection agencies and the IRS is helping to close the estimated $345 billion tax gap and has the potential to fund hundreds of new IRS jobs annually, according to a new analysis by the Tax Fairness Coalition.

The IRS estimates that between $1.5 and $2.2 billion in delinquent tax revenue could be collected over a 10-year period through its Private Debt Collection Initiative (PDC). Under the law creating the program, the IRS is authorized to use the first 25 cents of every dollar collected by the private collection agencies for enforcement efforts, including hiring new collection employees.

The average cost to train, provide salary, benefits, bonuses, taxes and overhead for an IRS function collection officer is $154,000 a year, according to data from various federal government reports. Based on the $1.5 billion estimate, roughly $60 million a year could then be available for the IRS to fund the employment of up to 390 new collection officers.

The IRS Private Debt Collection program has already collected more than $17 million since it began in September 2006. More than $4.25 million has been made available to the IRS, which could result in the hiring of as many as 28 new IRS employees. And at the current run-rate, a total of 75 IRS employees could be hired through the pilot phase, which ends March 2008.

"It’s unfortunate that our opponents want to kill a program that is proven to work and that has the potential to create hundreds of new IRS jobs," the Coalition said. "In fact, not a single agent or employee of the IRS has been displaced as a result of this program."

Through the funding of new collection positions, the IRS will be able step up its collection of delinquent taxes, ensure tax fairness, and help remove the "tax gap burden" that costs law-abiding taxpayers an additional $2,700 on their tax bill each year.

Millions of delinquent taxpayers have never been contacted about their obligations. Many of these individuals are now being reached and paying their delinquent tax debt thanks to the IRS Private Debt Collection program.

In addition to helping close the tax gap and creating new jobs at the IRS, the program is operating well, affording delinquent taxpayers all rights and protections provided under the law, as evidenced by the following successful outcomes:

- Customer service satisfaction – private collectors have achieved 94% satisfaction ratings, while IRS personnel have received 63%; – Perfect score for professionalism; – Secure, monitored collection processes with no instances of abuse, loss or fraud with taxpayer information; – Exemplary compliance in following all laws and regulations governing their collections activity; and – Positive remarks and evaluations from officials charged with overseeing the program, including the Treasury Inspector General for Tax Administration and the Government Accountability Office.

As Commissioner Everson has stated in numerous testimonies before Congressional Committees, the IRS Private Debt Collection Program is helping to clear a backlog of cases that would not be touched by IRS employees, even if Congress provided substantial new resources to the Service.

With the private collection agencies’ solid record in customer service and compliance, it is clear that they provide a critical service and invaluable assistance to the IRS. The private debt collection agencies generate funds sent directly to the U.S. Treasury to help reduce the tax gap. Indeed, without this important service, the tax gap would continue to grow – an outcome that all Americans, concerned with the fairness of our tax system and the ability of the federal government to meet our country’s critical funding priorities, wish to avoid.