Grassley gung-ho on private tax debt collectors

The controversy over use of private debt collectors to bring in some unpaid taxes has been percolating on Capitol Hill almost since the IRS hired the firms.

The proposal survived an early regulatory roadblock, as well as legislative efforts to kill it last Congress and again in the new 110th session.

Even the loss of one of the program’s original collection companies (the Austin firm and the IRS mutually agreed to end their deal back in February) didn’t stop the effort.

Now, the former head of the Senate Finance Committee is trying to ensure that it continues unimpeded. Charles Grassley, who now is ranking minority member of the Senate Finance Committee, is personally beseeching his fellow lawmakers to support the private tax collection effort.

In a "Dear Colleague" letter, the Iowa Republican says that claims of problems with the program are inaccurate.

Furthermore, Grassley says, the federal tax agency’s own infrastructure is better equipped to place liens and garnish wages than perform the basic tax collection tasks now being handled by two private bill collection companies.

In his own words: "The opponents of the IRS program to collect uncontested taxes owed to the U.S. Treasury have put forth an amazing campaign of misinformation. Every year, over $20 billion of unpaid taxes are lost due to the tolling of the 10-year statute of limitations," Grassley wrote in the letter distributed to the other Senators on Monday.

"There are currently over 7 million cases representing over $90 billion languishing at the agency that could be collected. Some of this money is best collected by the tough cops of the IRS, fully empowered to seize property, garnish wages, freeze bank accounts and sell the family home or business," he wrote. "But, a large percentage — typically the smaller, newer debts — is best obtained by a modern outbound call system, empowered only to find, call and convince."

Grassley says that proposals to end the private collections and retrain IRS personnel to do the job demonstrate "a complete misunderstanding of how a sophisticated, modern outbound calling program works, and what it takes to build one."

In addition, Grassley says his 20 years of legislative oversight lead him to conclude "that building infrastructure and creating new business practices internally is an almost impossible task for the IRS."

Thinking positively: Grassley’s letter also cites the high marks the collection agencies have received on customer satisfaction surveys; the relatively few harassment complaints filed against the collectors; and the ever-present cost factor or outsourcing.

The Senator concedes that the IRS needs more collection personnel, but argues that global and even state tax systems indicate that that "best practices for tax collection" is a combination of governmental and private resources.

Finally, Grassley says that the private collectors are not usurping inherently governmental functions: "The private collection agencies are only empowered to find the taxpayer, contact the taxpayer directly, and enter into either an immediate payment or short-term installment agreement. Any questions or problems are directed immediately back the IRS. If the taxpayer still refuses to pay, the updated data on his or her whereabouts will only strengthen and improve IRS’s ability to take more drastic measures."

Read more about it: You can read Grassley’s full letter to his Senate peers here.

The Senator’s Web site also links to the IRS response to questions about the private collection program during a January Congressional hearing.