IRS says private collectors cost more

WASHINGTON – The nation’s chief tax collector said Wednesday that using private agencies to collect debts under a new program will cost more than hiring additional agents to do the job.

But IRS Commissioner Mark Everson also said it’s a necessary part of Washington’s budget battles.

Everson told Rep. Steven Rothman, D-N.J., he agreed with an assessment that using private agencies will cost the government more.

“I admit it. I freely admit it,” Everson said.

The private agencies will get 22 to 24 percent of the tax money they collect, Everson told lawmakers on the House Appropriations subcommittee that oversees the IRS budget.

“It is wasting taxpayer money,” Rothman said. “It’s offensive to me. It’s offensive to my constituents.”

Everson disagreed that the program wastes taxpayer dollars. It’s necessary to use the private companies, he said, because hiring more IRS employees shows up on the federal budget as an expenditure. The budget doesn’t acknowledge the extra money that additional employees might collect.

The IRS must compete with other federal agencies for money at a time when deficits are increasing. President Bush and Congress have been freezing or cutting budgets for all programs outside homeland security and defense.

“That’s a bad place to be,” Everson said, eliciting laughs from lawmakers.

The IRS this month awarded contracts to three companies to start the first phase of the program, which Congress authorized in 2004.

Private collectors will track down people who agree they owe taxes but haven’t paid.

The trial was to start this summer, but protests by two companies that lost their bids to do collection work caused a delay of about three months.