IRS still wants your tax money, but won't outsource collection duties

The Internal Revenue Service is ending it's contracts with private debt collection companies and will hire as many as 1,000 federal workers to collect delinquent taxes, the agency announced today.

"I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward," IRS Commissioner Doug Shulman said in a statement, citing a study that showed it was more cost-effective for the IRS to do its own collections work.

The agency head also said that IRS personnel could do the job better than outside contractors because they have "more flexibility handling cases."

"In these challenging economic times, I have asked all IRS employees to go the extra mile to help financially distressed taxpayers," Shulman said. "IRS employees have more options available to them to resolve difficult collection cases."

The IRS hired outside companies to assist in collecting delinquent taxes in 2006 after Congress passed voted to permit the practice in 2004. The current one-year contracts expire today, according to the IRS.

Some Republicans have fought to keep the private companies involved in IRS debt collection, arguing that it creates jobs.

"It's hard to believe that after worrying so much about keeping people employed, the administration has chosen this route," Sen. Chuck Grassley said in statement.

Some Democrats, the National Treasury Employees Union, and consumer groups have argued that federal workers can do the job for less money and will cut down on abusive collection tactics.

"This result, a long time coming in the face of growing opposition to the program, is not only a good decision by the IRS, it is the right decision," the union's president, Colleen Kelley, said in a statement. "It reaffirms what NTEU has said repeatedly—that given the tools and resources, no one can perform the work of the federal government better than federal employees. This is an important vote of confidence for IRS employees."