Why Are You Paying More to Outsource IRS Collection Efforts?
There have been many news reports lately regarding the IRS’s new program to outsource delinquent tax collections to private collections agencies or PCAs including this report in the New York Times.
According to the IRS it will be paying PCAs 22¢ to 24¢ on the dollar to collect funds that are due to the federal government which is far more than the 3¢ to 7¢ on the dollar it would cost if IRS agents did the collecting.
Why is the IRS outsourcing collections if it can do it more efficiently? Congress has refused to authorize the hiring of more IRS agents to assist with the collection efforts.
Yes, I had to do a double take on this too. The nation debt is over $8.5 trillion and the federal government is running a deficit of over $300 billion dollars a year. Meanwhile the tax gap for 2001, the amount citizens actually owe vs. the amount they paid, is $290 billion after the efforts already made by the IRS to collect amounts due.
Given these staggering amounts, it seems to me a no-brainer for Congress to fund internal collection efforts. The annual deficit could be brought to near zero if Congress just gave the IRS the tools it needs to collect what is already due. Instead taxpayers, you and me, will foot the bill for the more expensive private collection agencies.
It just boggles the mind.