Academic journal article Journal of Accountancy , Vol. 182, No. 3
The Internal Revenue Service awarded five contracts to private collection agencies to collect delinquent federal taxes from individuals and businesses. In 1996, Congress earmarked $13 million and mandated an IRS pilot program to test the use of private law firms and debt collection agencies to boost tax collection.
The contractors will receive limited case information on individuals and businesses the IRS has been unable to contact and those who have not responded to written notices and phone calls. The agencies will remind those taxpayers of their outstanding liabilities. They also will inform them about the alternatives available to resolve tax liabilities, such as installment agreements and extensions of time to pay.
CPAs question the new collection method
There is some concern among tax practitioners that a third-party collection agency will make it more difficult to settle erroneous delinquency claims. Cherie Jeanne O'Neil, CPA, a professor at the University of South Florida in Tampa, said revenue agents had more audit expertise and a better sense of the legitimacy of a deficiency. "Clients who hear from a private agency must pay the agency and then go through the IRS claims procedure process," said O'Neil. She also said she was concerned that private collection agencies would have access to too much confidential information about the taxpayers, "To what extent are the collection agencies going to be aware of a taxpayer's privacy?" asked O'Neil.
But according to an IRS release, the contract provisions would ensure that taxpayer privacy rights would be protected. The release also said the agencies would be limited to locating delinquent taxpayers, reminding them of the liabilities and securing promises to pay or commitments to enter installment agreements. …