Wednesday, April 25, 2007

IRS Outsourcing

In a post on Argmax the author described the current situation in which the IRS outsources debt collection. Within the next two weeks the IRS will turn over the tax information for over 12000 individuals who owe $25000 or less in tax debt. The IRS will still employ their own agents to collect larger debts, but they say that outsourcing the smaller debts to private sector companies is necessary because of constraints imposed by congress. Congress has told the IRS that they can not hire any new employees, which is why they are forced to outsource. They say that this will be much more expensive than using in house debt collectors.

The company that the IRS has hired to do most of the debt collection is the law firm of Linebarger Goggan Blair & Sampson. This firm has previously been under investigation for their collections practices. It is curious why the IRS would hire a company with a less than perfect track record. It is possible that they are having the word done at a low price due to so type of plea bargain or agreement resulting from the investigation. The most likely explanation for the outsourcing is that it is temporary. The immediate cost of hiring an outside firm is greater in the beginning, but these employees will only be paid until the debts are collected. If the IRS were to hire more employees they would have to keep them permanently and pay them even after the debts were all collected. The current program implemented by the IRS seems like an economically prudent solution.

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