Recording raises questions about tax collection calls

Companies calling on behalf of IRS are limited by privacy restrictions, industry official tells lawmakers.

House lawmakers heard first-hand on Wednesday the frustration of a taxpayer whose debt was referred to a private collection agency, but an Internal Revenue Service official said expansion of the controversial outsourcing program would proceed on schedule.

House Ways and Means Committee member Rep. John Lewis, D-Ga., played an audio recording of an unidentified taxpayer whose delinquent tax debt had been turned over to The CBE Group Inc. of Waterloo, Iowa, one of two companies working under an IRS pilot program to give relatively simple tax debts to private sector firms for collection.

In a series of calls, three debt collectors mentioned just a first name and exhorted the taxpayer to call them back at a certain number. When he returned the call, the man learned that it related to a "personal business matter" and was asked to provide his Social Security number and mailing address before the collector would further identify what the call was about -- a demand that he refused, citing security concerns.

When the man asked that the calls cease, a collector said, "I'm not sure what we can necessarily do to stop that." The call ended in a standoff, with the taxpayer saying he would not provide any personal information until he was informed of the purpose of the call, and the collector saying she could not explain until his identity had been verified.

Thomas Penaluna, CBE Group's president and chief executive officer, testified that the program operates under strict privacy restrictions that limit the disclosure of tax information to anyone other than the taxpayer, so collectors are limited in what they can say until a taxpayer's identity is confirmed.

But asked whether he would have returned the brief initial calls left by strangers, Penaluna said "no." Several lawmakers and witnesses also said they would not provide their Social Security number to a stranger over the phone.

Led by Rep. Chuck Rangel, D-N.Y., chairman of the committee, several lawmakers called for the program to be terminated, while others defended it as a way of recovering debts that would otherwise go uncollected.

IRS Acting Commissioner Kevin Brown confirmed that the types of cases handled by the private firms are low on the agency's list of priorities, and said none of the delinquent debts would be collected without the commission-based pilot program.

Asked by Rangel to place a moratorium on about 10 new contracts scheduled to be signed by the end of the year, Brown declined. He said without the new contracts, the program would lapse when the two existing ones end in March 2008.

Brown joined CBE's Penaluna in calling for adjustments to the program, including changing the law to allow collection companies working for IRS to mention the agency in their calls.

Colleen Kelley, president of the National Treasury Employees Union and a vocal critic of the program, said private debt collectors have no interest in individuals' long-term tax compliance, making it more likely that they will risk alienating someone to secure a payment. She said IRS collectors' training and more extensive access to files allows counseling of delinquent taxpayers.

After the hearing, Dan Drummond, a public affairs representative for the Tax Fairness Coalition, an association of debt collection companies, took issue with the unidentified taxpayer's description of the calls he had received as "harassing."

He said the collector's tone throughout the call was "pleasant as pie."

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