Sen. Chuck Grassley, R-Iowa, the ranking member of the Senate Finance Committee, has taken National Taxpayer Advocate Nina E. Olson to task over her recent annual report to Congress.

In Olson’s report, she singled out a number of the Internal Revenue Service’s collection policies as needing a drastic makeover. The report suggested that the IRS make better use of collection alternatives, such as offers in compromise, recommended that Congress entirely scrap a pilot program outsourcing the collection of relatively uncomplicated back taxes to a trio of private contractors.

In a letter dated Feb. 2, Grassley outlines his own concerns that Olson has called for repeal of the program before giving the pilot a chance to work, and says he has concerns about her office’s analysis of the costs and benefits of the program.

“The tax debt collection arena, with approximately $120 billion of uncollected taxes due and owing, is an area begging for improvement,” Grassley wrote. “The use of [private collectors] is an active, immediate and proven step towards increasing the number of closed collection cases.”

Grassley said that he has heard that the performance of the collectors has been better than the IRS’s planning assumptions, and that the private agencies have abided by the Fair Debt Collection Practices Act, the Privacy Act, and the Fair Credit Reporting Act, as well as the IRS Restructuring and Reform Act of 1998, which limits overzealous collection
tactics by collection agents.

In addition to asking Olson to reply to a number of questions by Feb. 28, Grassley urges her to be “more open-minded” when it comes to the program, saying that the pilot is allowing the IRS to collection millions of dollars from cases “that would otherwise lie dormant until enough interest and penalties have accrued for [it] to be assigned for IRS collection activities. “

In January, more than a dozen senators signed on to sponsor a bill that would stop the IRS from outsourcing any debt collection. A Government Accountability Office report from October found that a better system needs to be put in place to evaluate the results of the program objectively.

Grassley’s full letter is available at http://finance.senate.gov/press/Gpress/2007/prg020207c.pdf.

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