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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.”