The Efficiency of the IRS's Automated Collection System

The computerized network that the IRS uses to communicate with delinquent taxpayers through the IDRS, or Integrated Data Retrieval System, is called the ACS, or Automated Collection System.

To handle the collection of taxes and to let IRS officers to communicate with taxpayers to fight the delinquent taxes IRS issue, the ACS was made in the 1980s. In order to fix the tax debt, notices, liens, or levies are provided and certain cases are scrutinized by tax examiners through this system. The system has important data on audit information and taxpayer information.

Every piece of information that is stored in the ACS is supported by other methods, like bank statements, corporate files, court records, and by contacting creditors. The system is integrated with reviews for consistency and validity.

The question remains if the ACS is an effective method to collect taxes. A recent hearing was held by congress to decide if the ACS was better than private means.

ACS is much less expensive, as emphasized by consumer tax advocates opposed to privatization. Nina Olsen, the IRS's National Taxpayer Advocate, compared the expenses of running private outsourced collections vs. ACS. Including commissions of up to 24% per amount collected, the expense of the private collection program is $12 million per year. These collectors are projected to bring in a measly $23 million in 2008, resulting in net revenues of just $11 million.

By comparison, if $7 million were invested into the Automated Collection System, then the revenues could total from $91.8 million to $145 million with no costly commissions. Olsen projects that the privatization of collection is costing the government about $81 million each year.

On the other hand, the IRS says that it has resorted to outsourcing because it cannot afford to hire more revenue officers to address the IRS issue of debt collection. The IRS is currently testing the efficacy of the private debt collection method by regaining control over certain cases that were turned over to debt collection firms and addressing them in-house. They are planning to compare the results to decide which method is more effective.

The president of the National Treasury Employees Union, or NTEU, Colleen Kelley, expressed her opinion that private debt collectors are more expensive than hiring revenue employees and puts taxpayers' details in danger.

Kelley also points to the fact that IRS employees are some of the most effective tax collectors in the United States in her opposition to the private collection of federal taxes. For instance, a debt of $100 collected by IRS officers only costs 40 cents. This was a two cent decline from 2007, in spite of a big decline in the number of IRS employees. Ms. Kelley states, "The IRS runs one of the most cost-efficient tax collection systems in the world, yet this administration insists on forging ahead with its expensive privatization scheme in spite of dismal financial results and ever-growing opposition."

As opposed to private debt collection, utilizing the ACS is more cost efficient. The government will have the chance to recoup revenues through the work of IRS employees.