U.S. Rep. Bill Pascrell, Jr. (D-NJ-08) renewed his call to end the federal government’s use of private companies for the collection of federal income taxes following a House Ways and Means Committee hearing on the controversial matter.

“Tax collection is an inherently governmental responsibility.  When it is administered by a profit making entity, taxpayers are at risk.  The hearing I had with the acting Commissioner of the IRS, and the National Taxpayer Advocate reaffirms my call to repeal private tax collection.”

On March 22, 2007, the House Ways and Means Committee launched an investigation into the Internal Revenue Service’s (IRS) use of private debt collection companies citing complaints from taxpayers, instances of harassment and violations of law, and the inability of taxpayers to hold the federal government liable for the actions of a collection contractor.

“The contracting of private tax collection agencies has been an utter failure,” stated Pascrell. “Taxpayers have been harassed, accountability has been lost, and the cost has negated any fiscal benefit to this country.  This is a failed experiment that has sent our deficit deeper into the red.  The United States stands to restore the integrity of our tax system and make fiscal gains by returning all tax collection responsibilities to the federal employees of the IRS.”  

The Committee focused on issues related to whether: (1) federal income tax collection is a fundamental governmental function and, as such, should not be contracted to the private sector as a profit-making venture; (2) the IRS can collect federal income taxes more efficiently and effectively than private debt collection companies; (3) taxpayers are subject to confusion, questionable private debt collection company tactics, harassment, and abuse due to the use of private debt collectors; (4) adequate options are available to the IRS to address uncollected taxes in the accounts receivable inventory; (5) the program is ready for expansion and new private debt collection contracts should be awarded in the coming months; and (6) Internal Revenue Code section 6306 should be repealed.

The use of private debt collectors for federal income tax purposes continues to be controversial.  The IRS Taxpayer Advocate, various consumer interest groups, IRS employees, and others have expressed concern that the use of private companies to collect federal taxes is inappropriate and that the tax law provision should be repealed.  Others, including private debt collection companies, have argued that the private debt collectors collect money that would go uncollected.

“I join Chairman Rangel in urging the IRS to stop awarding contracts to tax collection agencies.  The committee made its concerns crystal clear today, and I expect the IRS to cooperate with our call to restore the integrity of America’s tax collection system.”   

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