Taxation & Estate Planning

Is the IRS's Automated Collection System Efficient?

By Darrin Mish

What's the Automated Collection System? The Automated Collection System (ACS) handles the Integrated Data Retrieval System's (IDRS) balance due and non-filer cases needing telephone communication for resolution. Simply put, the ACS is a computerized network which contacts taxpayers who owe money to the IRS, which is a major IRS problem.

Audit and taxpayer information are a few of the information stored in the ACS. This was developed in the 1980s to provide taxpayer examiners an opportunity to contact delinquent taxpayers, review cases, and issue notices.

Reviews for consistency and validity is integrated in the ACS. It's verified by methods such as court records, bank statements, creditors' files, and corporate files.

The question remains if the ACS is an efficient method to collect taxes. A hearing to decide if private methods were better than the ACS was held by congress.

Privatization is more expensive than ACS, as emphasized by Nina Olsen, an IRS National Taxpayer Advocate. Private collectors collect up to 24% in commissions, but only bring in net revenues of $11 million while the program costs $12 million each year to use.

In comparison, if $7 million were invested into the Automated Collection System, then the revenues could total from $91.8 million to $145 million with no expensive commissions. Olsen projects that the privatization of collection is costing the government about $81 million per year.

On the other hand, the IRS says that it has resorted to outsourcing because it cannot afford to hire more revenue officers to address the IRS issue of debt collection. They are now handling in-house particular cases they regained from private collection firms to examine the efficacy of the process. They intend to determine which method is more efficient by comparing the outcomes.

Colleen Kelley, the president of the National Treasury Employees Union (NTEU), testified at the hearing: "There has been no question from the outset that using private companies to collect taxes is far more expensive than having trained, accountable IRS officers perform this work and poses a severe and unnecessary risk to taxpayers' sensitive and personal information."

Kelley also stresses that IRS officers are the most cost efficient tax collectors in the United States, costing only 40 cents for every $100 collected. She emphasizes that with this resource, there is no necessity to outsource to private debt collection.

The government can regain revenue from unpaid taxes with the ACS. Private debt collection is costly when compared with the cost effective work done by the IRS officers

Darrin T. Mish is an experienced, nationally recognized tax attorney who has been practicing tax law for over a decade. He has an AV rating by Martindale-Hubbell and has been honored with a listing in Martindale-Hubbell?s Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers, and with that in mind, he travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is also a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 888-GET-MISH.

Full post as published by IRS Problem Solver Blog on August 11, 2009 (boomark / email).