Summary: If the Internal Revenue Service (IRS) is to compete successfully with private collection companies and state governments for payments from debtors, it must adopt more effective strategies for collecting delinquent taxes. IRS has traditionally followed a lengthy and rigid three-stage collection process beginning with a series of written notices, or bills; followed by telephone calls; and culminating in visits to delinquent taxpayers. Because of legal restrictions, IRS handles all aspects of delinquent tax collections itself and does not evaluate or reward its collection staff on the basis of collection performance. Because of inadequate information, IRS pursues delinquent accounts without knowing whether the amounts recorded in the accounts are valid receivables and with only limited knowledge of the characteristics of delinquent taxpayers. In contrast, many state tax departments and private sector collectors stress early telephone contact. In addition, private collectors routinely use collection performance statistics in determining pay and bonuses for collectors. These firms are also increasingly using debtor profiles to customize their debt collection procedures. For IRS to be a successful competitor, it will have to adopt more effective collection strategies and expand its use of cooperative efforts with state governments.
