crossposted from unbossed
According to her report to Congress, National Taxpayer Advocate Nina E. Olson reports that the IRS has gone back on its promises and is using private debt collectors on complex cases.
The report summary states:
IRS Collection Practices. The National Taxpayer Advocate’s 2006 Annual Report to Congress raised a number of concerns about IRS collection practices. Joint working groups have been established to work on five issues – levies, allowable living expense standards, installment agreements, offers in compromise, and early intervention techniques. However, the Office of the Taxpayer Advocate remains concerned about additional collection issues, including resorting to seizures before all viable collection alternatives have been exhausted, under-utilization of partial-pay installment agreements, and excessive delays in collection that exacerbate taxpayer delinquency problems because of the accumulation of interest and penalties. The IRS is working with the Office of the Taxpayer Advocate to address these concerns, and the collaboration will continue in FY 2009.
Other areas of emphasis for FY 2009 identified in the report include monitoring the private debt collection program, working with the IRS to assist taxpayers with disproportionate tax liabilities due to alternative minimum tax resulting from the exercise of incentive stock options (known as "ISO/AMT" tax liabilities), working with the IRS to address problems and inefficiencies in the correspondence examination program, and updating a 2003 report on the standards and structure of federal ombudsmen offices.
The full 190-page report may be found here.
In recent testimony before Congress, the National Taxpayer Advocate reiterated her call for repeal of the IRS’s authority to use private collection agencies (PCAs) to collect delinquent taxes. The National Taxpayer Advocate has identified the Private Debt Collection (PDC) program as a serious problem facing taxpayers and the tax administration system in her last three Annual Reports to Congress. In these reports, we have expressed a number of concerns about the PDC initiative, including potential taxpayer rights violations and the transparency of PCA procedures to the public and to congressional oversight.
In this report, we identify three new concerns about the PDC initiative:
• The IRS’s own collection actions account for a significant portion of the PDC program’s full-paid accounts;
• The IRS has left cases in the control of PCAs for much longer than originally intended; and
• The IRS has not provided a clear reconciliation of PCA accounts.
. . .
Since the inception of the program, the National Taxpayer Advocate has raised numerous concerns about the PDC initiative. She has focused on three, in particular:
• The PDC program is probably a money loser when foregone revenue is taken into account;
• The IRS’s cost estimates of the PDC program are incomplete; and
• The IRS’s inventory of "easy" cases for PCAs to work has dried up.
The report goes into detail on each of these points. One that is particularly interesting is how cost-ineffective using private debt collectors is compared to using regular IRS employees.
Here is the NTEU's take
Independent Taxpayer Advocate Details Serious Problems with IRS Private Tax Collection Program
Washington, D.C.—The National Taxpayer Advocate, an independent voice within the Internal Revenue Service (IRS), has found serious new problems with the agency’s use of private tax collectors—including an issue that sharply undercuts the fundamental premise of the program.
In a mid-year report to Congress, Taxpayer Advocate Nina Olson—who has previously called for the program’s end—said the IRS is now giving to private tax collectors outstanding cases involving complex issues that IRS employees are currently working to resolve. Further, the report found that IRS costs are underreported and that the IRS’s own collection actions account for a significant portion of the revenues attributed to the private collection program.
"Placing these types of cases with the (private tax collectors) runs directly counter to the premise on which the program was based—namely, giving (them) only the easy types of cases the IRS itself would not work," Olson told Congress. She called that "disturbing, because this initiative was premised on the IRS having large numbers of cases that a simple phone call could resolve."
President Colleen M. Kelley of the National Treasury Employee Union (NTEU), who has been leading the fight to end the privatization of this inherently governmental function, called the Olson report "damning evidence of the folly of continuing this costly and misguided program."
Further, the NTEU leader said, the Olson analysis "shows that a significant portion of the money claimed to have been collected by the private companies came in to the Treasury as the result of the IRS’s own collection actions. It is clear there is no supportable rationale for continuing this program."
Olson was sharply critical of the cost-benefit ratio of the IRS program, providing data suggesting that the use of private tax collectors costs the government about $78 million a year in foregone revenue.
Moreover, she said, the IRS—which is overseeing the program with 54 of its own employees—is failing to separately track all expenses related to it. "As a result," she said, "the costs of the program are understated by an unknown amount."
The Taxpayer Advocate also took the IRS to task for extending the period during which the private collectors may retain a given case. "It is unclear why the IRS would run the risk of leaving taxpayers’ confidential tax information with outside contractors for extended periods of time when the contractors are taking no productive action on the case," she said.
Olson noted that of the nearly 43,000 cases placed with the private collectors for at least a year, only 21 percent have had "a meaningful disposition"—and nearly 40 percent of those dispositions were the result of a payment generated by IRS action—not the actions of the private collection agencies.
"The Taxpayer Advocate has found that the costs of this program are higher than the IRS is reporting and the revenue is far lower," President Kelley said. "This is an unsustainable program and I echo the call of the independent National Taxpayer Advocate to immediately end this sham."