WASHINGTON, DC – U.S. Treasury Secretary Timothy Geithner has notified Congressman Steny H. Hoyer (D-MD) this evening that Treasury will not be renewing contacts for the IRS private debt collection program. The decision came as the findings of a study evaluating the cost-effectiveness of contracting out Internal Revenue Service (IRS) debt collection services were released today, showing that federal employees produce approximately three times the revenue at a third of the cost.
“I applaud the Obama Administration for ending the IRS private debt collection program, which a new study shows provided no government savings, and in fact cost the government more,” stated Congressman Hoyer. “I commend the Obama Administration for doing what the last Administration refused to do – provide an honest evaluation of the merits of contracting out this public service to private agencies. Now that we have the facts, ending this wasteful policy -which has come at great cost to taxpayers - and putting the job of tax collection back with the trained professionals at the IRS is the right thing to do.”
The study found that the cost of the IRS debt collection program (IRS Automated Collection System or ACS) averaged $0.07 per dollar collected, while the cost of the private debt collection (Private Collection Agencies or PCAs) was $0.24 per dollar collected. The IRS program collected 11% of the outstanding debts and moved 28% of taxpayers into payment status, compared to 4% and 11% for PCAs. The study was reviewed by the Mitre Corporation, which concluded that the study was correct in finding that ACS was more cost effective than PCAs.
IRS Private Debt Collection Study
Cost Effectiveness Study Review