Washington, D.C. — The Internal Revenue Service could no longer hire private contractors to collect taxpayer debt under legislation introduced by Rep. John Lewis (D-Ga.) and endorsed by the National Treasury Employees Union (NTEU).
The Taxpayer Protection Act of 2017 would repeal the congressional mandate that the IRS outsource collection work to for-profit companies. Previous attempts to use private collection agencies to collect tax debt have ended in failure and wasted resources.
“Rep. Lewis has wisely proposed a quick and easy way to stop this program before it does any more damage to the U.S. Treasury or to taxpayers,” NTEU National President Tony Reardon said. “Repealing the IRS authority to use private collection agencies would save money and reduce taxpayers’ exposure to identity theft and fraud.”
Just this week, the Treasury Inspector General for Tax Administration announced 11 people have been charged with crimes involving schemes to impersonate IRS agents and steal money from innocent taxpayers by claiming they owed back taxes.
“Telephone scams are already a threat and allowing private companies to represent the IRS only compounds the problem,” Reardon said.
The IRS announced on April 4 that it would start referring debts to four private collection agencies, which are paid on a commission basis.
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. These include the ability to postpone, extend or suspend collection activities for limited periods of time; making available flexible payment schedules; the possibility of waiving late penalties or postponing asset seizures and Offers In Compromise (OIC), an agreement between a struggling taxpayer and the agency that settles a tax debt for less than the full amount owed.
In a letter to Lewis endorsing his legislation, Reardon cited the IRS’ own statistics that previous programs using private debt collectors led to dozens of complaints and illegal activity.
In one instance, private collectors made 150 calls to the elderly parents of a taxpayer after the collection agency was notified he was no longer at that address,” Reardon wrote.
A pilot program to use private collection agents in 1996 was cancelled after 12 months and a net loss of $17 million.
The IRS tried again in 2006 and while the program was projected to bring in $2.2 billion in new revenue, data from the IRS showed that it resulted in a net loss of almost $4.5 million to the federal government, after subtracting $86.2 million in program administration costs and more than $16 million in commissions to the private collection agencies. The Treasury Department - again - cancelled the program.
“We commend Rep. Lewis for trying to prevent the IRS from making this same mistake a third time,” Reardon said.
NTEU urges Congress to pass H.R. 2171, and allow the trained professional civil servants of the IRS to do their job.
NTEU represents 150,000 employees at 31 federal agencies and departments, including the IRS.