Private Collection of Tax Debts

Current status and outlook

Updated December 21, 2007

A provision putting an end to the use of private debt collectors by the IRS was included in the first House version of the AMT patch legislation but has now been dropped from that bill.

Use this page to keep on top of developments concerning legislation dealing with the use of private debt collectors by the IRS.

The issue
Who's affected
The politics
Recent events
What's next

The issue

A 2004 tax law gave the IRS authority to use private firms to collect certain tax debts. The IRS has awarded contracts to three firms and plans to add as many as twelve more. Legislation has been proposed to remove this authority and terminate the practice.

Who's affected

The legislation affects taxpayers who owe tax debts and may have to deal with private debt collectors rather than the IRS.

The politics

Private collection of tax debts has been favored mainly by Republicans and criticized mainly by Democrats. Proponents generally favor shifting as many functions as possible from the government to the private sector. Critics say tax collection is a core governmental function that should not be in private hands, and argue that the practice transfers confidential taxpayer information into private hands, is less cost-efficient than hiring additional IRS collection personnel, and forces taxpayers to deal with private debt collectors who aren't subject to the same strict accountability standards that apply to IRS employees.

Recent events

Late in 2007, Senate Republicans blocked a vote on a version of the "AMT patch" legislation that included a provision that would terminate IRS use of private debt collectors after existing contracts run out. The provision does not appear in the version of the AMT patch legislation that finally became law.