Washington, D.C – The U.S. Treasury is losing money and lower income taxpayers are unfairly burdened by the Internal Revenue Service’s (IRS) use of private contractors to collect overdue federal tax debt, according to the National Taxpayer Advocate’s latest report.
The program shortchanges American taxpayers, disregards the IRS’ own policy to minimize the financial hardship on lower income taxpayers, and may expose taxpayers’ personal information, according to the June 28 mid-year report to Congress.
The findings by National Taxpayer Advocate Nina Olson confirm concerns raised by the National Treasury Employees Union (NTEU) that replacing professional civil servants of the IRS with for-profit debt collectors is bad policy.
“I wish I could say I was surprised, but this program has been tried and abandoned twice before,” said NTEU National President Tony Reardon. “And now there is fresh evidence that the third time is not the charm.”
Congress mandated that the IRS, again, privatize its debt collection work, and the first collection cases were assigned to contractors in April.
More than half of the taxpayers who had their cases referred to the private debt collectors had income below 250 percent of the federal poverty level, the report states. This runs afoul of the IRS’ own policy against pressuring taxpayers who cannot afford to pay immediately, in full.
In 2016, the IRS’ internal debt collection procedures, using IRS employees, generated $4.7 billion in revenue for the government. But under the privatization program, most of those internal procedures are bypassed in favor of referral to the outside collection agencies, which can keep up to 25 percent of what is collected. The report said the commissions impose “unnecessary costs on taxpayers” and the Treasury.
NTEU is also alarmed by the possibility that private collection agents can access taxpayers’ Social Security numbers or Tax Identification numbers, which the report said may happen as the collection agents attempt to verify a taxpayers’ identity.
“Together with recently revealed call scripts that show one of the private collection agencies is harassing taxpayers with reckless advice on how to settle their federal tax debt, the evidence is mounting that Congress should reverse course,” Reardon said. “Fairly enforcing the nation’s tax laws is at the heart of the IRS mission, and it should not be farmed out to companies that only care about their bottom line and don’t comply with and respect taxpayer rights.”
NTEU represents 150,000 employees at 31 federal agencies and departments.