IRS Private Debt Collection Initiative Clears Contract Challenge

The on-again, off-again IRS initiative to use private collection agencies to chase tax delinquents vacillated back to the “on” position yesterday, if only for a brief time.

The Government Accountability Office (GAO) told the IRS last week that it had rejected a challenge from two competitors on the awarding of the initial contracts to three private collection firms. The IRS announced the news yesterday.

When the contacts were awarded to back in March, two companies unsuccessful in the running for the collection contracts challenged the bid process in formal complaints with the GAO. While the protests were being evaluated, the IRS formally froze all work on the initiative.

But with the announcement yesterday, the plan is moving forward. “The IRS has rescinded the stop-work order,” IRS spokesman John Lipold told MarketWatch. “Business is moving forward on that project.” The story is also being covered in Tax Notesmagazine.

ACA International also released a statement this morning confirming the rejected challenge. But the ACA?s released focused on a larger challenge the initiative must overcome to truly go into force.

The U.S. House of Representatives last week votedto block funding for the project. The Senate will have final say on whether or not the IRS gets the funding it needs to proceed with hiring the private collectors.

“Opponents of this public-private partnership believe that penalizing law-abiding citizens to the tune of $2,000 per person is an acceptable status quo. It’s a question of taxpayer fairness,” said Jenifer Loon, director of government affairs for ACA. According to the IRS, the net tax gap ? the difference between what taxpayers should pay and what they actually pay — for tax year 2001 was approximately $290 billion, which equates to a $2,000 surcharge on every American citizen who pays their taxes.