According to the General Accounting Office, the IRS shelved about $12 billion in tax debt in 2001 because it lacked the staff needed to collect the money. The agency receives about $2 trillion annually in tax payments.
Rep. Steve Horn, R-Calif., chose tax day, the deadline for filing tax returns with the IRS, to examine management problems at the agency. Horn is chairman of the House Government Affairs Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations.
"The IRS consistently resists the idea of using private contractors to assist in its collection efforts," said Horn. "I find this inexcusable."
IRS Commissioner Charles Rossotti admitted that budget shortfalls during the past few years led to staff shortfalls that resulted in fewer audits and reduced collection efforts.
"We absolutely must have the operating and modernization funds to incrementally hire skilled workers," Rossotti said.
Brady Bennett, the agency's director of strategy, research and performance, told lawmakers that the agency is not averse to using outside collectors on some delinquent accounts, and is working with a group of collectors to craft a plan based on protecting the rights of taxpayers and keeping inherently governmental activities, such as discretionary decisions on liens, inside the IRS.
"[But] we're also looking at alternatives to placing debt into the hands of a contractor," Brady said.
Rossotti pointed to stepped up hiring efforts in 2001, which focused on bringing in staffers with expertise in compliance, such as accountants and tax examiners, as evidence that the situation would be corrected.
"Skilled people are the hardest to replace [so] it's important that we continue this, that it's not a one-time thing," the commissioner said. "We absolutely must have the operating as well as the modernization funds to incrementally hire skilled workers."
Even after recounting long-standing management issues at the IRS, Horn praised Rossotti, who is leaving the agency when his five-year term ends in November.
"You will be leaving the IRS in better shape than when you took office," the lawmaker said.
During the past year the IRS saw improvements in its public approval ratings, reallocated resources and personnel to bring about improvements in customer service, and began overhauling its outdated computer systems.
In his testimony, Michael Brostek, director of tax issues for GAO, described Rossotti's attempt to overhaul the agency's operations as "a good faith effort."
"We have made recommendations over the years to assist the agency in achieving its goals, and some have been implemented," Brostek told lawmakers. "We recognize that this transformation is not easy and will take time."