Is the IRS's Automated Collection System Effective?

The Automated Collection System, or ACS, is a computerized network used by the IRS to contact delinquent taxpayers via an Integrated Data Retrieval System, or IDRS.

Audit and taxpayer information are some of the information saved in the ACS. This was made in the 1980s to provide taxpayer examiners a chance to contact delinquent taxpayers, examine cases, and give notices.

Reviews for consistency and validity is integrated in the ACS. Corporate files, creditors' files, bank statements, and court records support the data.

Is the Automated Collection System used by the IRS an effective method to collect taxes owed? Recently, a congressional hearing was held to decide if ACS or privatization was the most efficient and effective way of collecting taxes.

ACS is much less expensive, as emphasized by consumer tax advocates against privatization. The expense of ACS against private outsourced collections was compared by the IRS's National Taxpayer Advocate, Nina Olsen. The cost to use the private collection program is at $12 million each year, including private collectors' commissions (which can be up to 24% of the amount they collect). With only $23 million in collections, net revenues are only at $11 million.

Revenues could total up to $91.8 million to $145 million by utilizing the ACS, with no expensive commissions and an investment of only $7 million. The government spends about $81 million every year by privatizing collection.

The IRS reasons that it cannot afford to employ more officers for debt collection, that is why it outsources. They are, however, taking control of a few cases from private collectors and addressing them in-house to determine which method is more efficient.

At the hearing, Colleen Kelley, NTEU (National Treasury Employees Union) president, testifies: "There has been no question from the outset that using private companies to collect taxes is far more costly than having trained, accountable IRS employees perform this work and poses a severe and unnecessary risk to taxpayers' sensitive and personal information."

Kelley also points to the fact that IRS employees are among the most effective tax collectors in the US in her opposition to the private collection of federal taxes. For instance, a debt of $100 collected by IRS officers only costs 40 cents. In spite of a big drop in the number of IRS employees, this is a 2 cent drop from 2007. States Ms. Kelley, "The IRS runs one of the most cost-efficient tax collection systems in the world, yet this administration insists on forging ahead with its costly privatization scheme in spite of dismal financial results and ever-growing opposition."

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