Jul 10, 2008

What does an IRS Collections person return on investment?

It is increasing more and more...according to the latest Report to Congress by the IRS' Taxpayer Advocate Office. In prior reports, the ROI on an Automated Collection System ("ACS") employee was estimated at 13:1 - now it is estimated at 20:1!!

To supplement the Tax Fabian's blog entry on how many IRS Collection personnel would it take to recoup $42 million, I offer these statistics from the IRS that will return the $42 million of ill-spending:

The average annual ACS employee compensation package: $75,000 (on average)
With a 20:1 ROI- the ACS Representative would annually collect (gross): $1,500,000
Number of ACS Representatives to recoup the $42 million in one year: exactly 28

The IRS put in its budget for the past year, funding for 175 additional ACS representatives. By my math, that is a little over 5 more of those idiotic and reduntant letters.

In fairness to the IRS, it was Congress and its politicos (the Treasury Secretary) that mandated the letter. The IRS is a superb collector of tax as it has superpowers of collection: the right to seize property (i.e. a levy) without a judgement. The only requirement is the due process set forth in the Internal Revenue Code. With powers like that, no wonder they have a 20:1 ROI.

If you feel comfortable about going up against this Goliath of a collector, find a David that knows where to aim.

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