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Collecting for the IRS

  • Written by Sam Edens

edens samLast December, the Fixing America’s Surface Transportation Act (FAST Act) was made law by the federal government. Unlike the previous ruling which only allowed the IRS the authority to place collections with private debt collection companies, this new law went a step further by requiring the IRS to use private debt collection companies. The law also states that the IRS must begin entering into contacts within three months after the date of enactment. That timeframe is rapidly closing but there is no language detailing when the IRS will actually start placing inactive tax receivables.

Last year, I wrote about agencies investing their time and dollars in preparing for a government contract, primarily for the Department of Education contract. Collecting for the IRS is a new opportunity for established agencies to get into the government space and for agencies already in the space to service another line of government receivables. There is plenty of work that can be done in advance to prepare for this opportunity.

Data security should be a primary concern. If your collection software is preventing your agency from achieving compliance and hitting security benchmarks you may want to evaluate other software options or work with your current software provider to implement additional security features. Make sure the backend database is fully encrypted and that data in transit is as well. If encryption is available, you may want to verify it is turned on because in some collection products the encryption feature is optional and turned off by default in an effort to save space. Aside from the actual software, you should review and enhance your information security policies. If you do not already have these policies documented, you should address that immediately. Policies detailing available user accounts, access privileges, password policies, and how to work with sensitive data need to be covered. If you find yourself overwhelmed with implementing or updating data security policies, a great resource to start is the Federal Information Security Management Act (FISMA). It will not answer all the questions but FISMA will provide great direction and help to set things in motion.

Simply having a strong data security policy is not good enough. Awareness of the policy and to the ever-changing landscape of compliance and data security is key as well. Awareness begins with a strong training program. Create an electronic training program that focuses on working with government data and the sensitivity of that data. In a test environment, stage examples for users to encounter and work with sensitive data in your collection software. Wherever possible, implement automated IT processes that promote awareness.

So far, I have touched on policy and procedure ideas with a focus on the operation and environment. There are many items you can fine-tune directly in your collection software as well. First and foremost, make every effort to eliminate manual processes by replacing them with automation. Every time a user manually kicks off a process, renames or moves a file, or manually retrieves/sends data with an external vendor, the likelihood for user error increases. You may be surprised to find out that most manual processes like those mentioned can be automated within your software or with custom applications that work with your collection software. Take a step back to really understand and document all your processes. Then, review the list with your team or consultant(s), pick out areas where automation is an option, and prioritize the list before beginning any design or development. Second, take the time to evaluate and enhance your workflow. Agencies should implement this practice at least twice per year. The addition of new clients, the performance of your consumer representatives, and the strengths/weaknesses of your skip tracing efforts may introduce new trends or change trends that were evaluated when your existing workflow was designed. Find something that works best for your agency. Third, develop your own performance reports. Do not rely solely on canned reports that were delivered with your collection software. Like enhancing the workflow, there are metrics and key performance indicators (KPIs) meaningful for your agency. Many of the collection products have some sort of built-in mechanism for developing custom reports. If custom reporting within your software is not available, there are plenty of reporting tools with many connectors that may work with your product. Take a look at Business Objects (Crystal Reports), Cognos BI, Microsoft SSRS, or Tableau.

By refining a few of your operational policies and procedures and implementing some strategic changes in your collection software, your agency can be set up nicely for that new government contract. As with the Department of Education contract, you can bet the IRS will be gathering performance data on the agencies receiving placements and that the data will be made public via several published reports. Wouldn’t it be nice to see your agency at the top of that list?

Sam Edens has been with Emprise Technologies since 2006 and is currently serving as Vice President. Prior to his time with Emprise, Sam designed and developed performance and flow management software for UPS.