Wednesday, April 23, 2008

IRS doesn't need private tax collectors

NEWS from our Department of Poetic Justice: On April 15 - the tax filing deadline - the House of Representatives voted to bar the Internal Revenue Service from using private debt collection agencies to gather unpaid taxes. The measure would shut down a money-wasting IRS program that hires private firms to find delinquent taxpayers and collect debts. Problem is, the program costs more than the money that is collected.

Yes, you read that right. According to testimony in Congress this month, the IRS has spent about $75 million to run this program and collected a net $27 million - "and that's after paying $7.7 million in commissions," according to U.S. Rep. Earl Pomeroy, D-N.D.

This is a classic example of Washington bookkeeping: Twenty-five cents out of every dollar goes to the private collection agency, but after factoring in the start-up costs, overhead and other expenses required to oversee the program, it's a money-loser. The IRS hopes to break even by 2010, but don't look for any money-back guarantees on that.

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