IRS Considers Debt Collectors

The Internal Revenue Service is considering the use of private collection agencies to help it track down billions of dollars in delinquent taxes, raising concern Tuesday from key lawmakers about privacy and taxpayer protection.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee that oversees the IRS, said he is skeptical about putting such powers in the hands of for-profit businesses.

Earlier this year, IRS officials concluded after a preliminary analysis that use of collection agencies “is a feasible, cost-effective approach” to tackling some delinquent accounts, according to congressional testimony.

The Treasury Department, of which the IRS is a part, is still mulling over the idea.

The General Accounting Office, the investigative arm of Congress, recently estimated that at least $20 billion in unpaid taxes could be readily collected but is not being pursued.

The Wall Street Journal, which first reported Tuesday on the possible use of collection agencies, used an estimate of $240 billion in delinquent taxes. Much of that is not collectible because taxpayers have died.

If the Treasury Department decides to use collection agencies, it will confront a host of privacy and taxpayer protection questions. Congress would have a say in approving such a program or in providing its budget.

“While it is prudent for the IRS to explore options ... any proposal to amend tax laws to permit private debt collection would have to be measured against the important privacy and safeguard rights presently afforded taxpayers,” Baucus said.