GAO Report Sounds New Warnings on Private Tax Collection

A new report has found familiar problems with the IRS private tax collection program.

Despite two previous failed attempts, Congress mandated that the IRS again use private contractors to collect overdue federal tax debt. Starting in April 2017, the IRS has been referring collection cases to four different companies.

 “The IRS’s stated objectives did not acknowledge all key private debt collection program risks, such as scams and high costs compared to revenue collected,” according to a newly-released report from the Government Accountability Office (GAO).

As of September 2018, the IRS reported collections of about $89 million but costs $67 million to administer.

“Given the costs associated with managing these cases, without such analyses, IRS may continue to use resources inefficiently and assign cases with little or no potential for revenue collection,” the report said.

The report also warns that the IRS has not fully assessed potential risks to taxpayers. While the IRS documented six risks, including scammers impersonating collection agencies, GAO identified 10 additional risks, such as taxpayers agreeing to debt payments they cannot afford.  The IRS can’t effectively protect taxpayers or respond to risks if it hasn’t fully assessed how the program can harm taxpayers, GAO states.

NTEU has long maintained that using in-house IRS employees is a better value for taxpayers. And unlike private debt collectors, IRS employees have a variety of tools at their disposal with which they can help taxpayers facing financial difficulties meet their tax obligations

By this fall, the IRS plans to have assigned about 2.4 million cases that it expects to be eligible for the private tax collection program. NTEU and other consumer advocacy groups continue to oppose this program that replaces professionally-trained IRS employees with for-profit companies that work on commission.

Both the Treasury Inspector General for Tax Administration and the National Taxpayer Advocate have cited similar concerns about the private tax collection program in their respective reports.