IRS Awards Contracts for
Delinquent Debt Collection

WASHINGTON - The Internal Revenue Service today awarded contracts to five vendors to test the feasibility of using private firms to assist the IRS in collecting delinquent federal taxes from individuals and businesses.

The IRS's budget appropriation for 1996 (Public Law 104-52) requires that "$13,000,000 shall be used to initiate a program to utilize private counsel law firms and debt collection agencies in the collection activities of the Internal Revenue Service." The IRS received formal contract proposals from 33 vendors.

The five contracts were awarded to:

• Aman Collection Service, Inc., Aberdeen, SD
• Continental Credit Service, Kirkland, WA
• CSC Credit Services, Houston, TX
• GC Services, Washington, DC
• Unger & Associates, Dallas, TX

Under the terms of the contracts, the IRS will provide the private contractors with limited case information on individuals and business taxpayers with outstanding tax liabilities. The contractors will attempt to locate and contact both individual and business taxpayers to remind them of their outstanding tax liabilities. They will also inform them about the alternatives available to resolve the tax liabilities, such as installment agreements and extensions of time to pay. Cases will include situations in which employers have failed to deposit trust fund taxes (social security and income taxes withheld from employee paychecks).

The cases the IRS provides to contractors will be those where the IRS has been unable to locate or contact taxpayers, as well as those where the IRS has been unable to secure payment through written notices and phone calls.

The contractors will work on cases of delinquent individual and business taxpayers currently or formerly located in Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming.

Under the terms of the contracts, contractors will be limited to locating delinquent taxpayers, reminding them of their tax liabilities, securing promises to pay the IRS or commitments to enter into IRS installment agreements, monitoring payments against promises and commitments, and following up with taxpayers. Contractors may use telephone, mail and other methods of contact, but they are strictly prohibited from initiating direct, in-person contacts. All payments resulting from contractors' efforts will be made directly to the IRS, not to the contractors. The contract provisions ensure that the privacy and rights of taxpayers are protected, and contractors must comply with all federal laws relating to collecting tax liabilities, including the Internal Revenue Code of 1986 (specifically including the disclosure provisions of the Code that prohibit improper disclosure of taxpayer information), the Privacy Act of 1974, the Fair Debt Collections Practices Act and the Taxpayer Bill of Rights.

Contractors will be paid a fixed price for each successful contact the IRS accepts. In addition, contractors will also be paid performance fees based on the results of the contact -- full payment within 30 days; extensions of time to pay; installment agreements completed by the contractor; or installment agreements completed by the IRS. The IRS emphasized that contractors will not be paid based on a percentage of what is collected.

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