Home Media Center News Releases

Washington—While the Internal Revenue Service (IRS) conducts a month-long review of IRS use of private tax collectors, the leader of the union representing IRS employees said financially-struggling taxpayers will continue to be disadvantaged by the program which should end now rather than wait for another review.

With a contract renewal deadline looming for two IRS tax collection firms and the economy worsening, President Colleen M. Kelley of the National Treasury Employees Union (NTEU) said the IRS has tools to take into account how the struggling economy is affecting taxpayers, but those options do not apply to taxpayers who are selected to deal with IRS private tax collectors.

“This is especially troubling because the private tax collection program targets the most vulnerable taxpayers on ‘Main Street’,” said President Kelley. “Not only are vulnerable taxpayers being turned over to the private tax collectors but once in the program, the tax collection firms cannot offer these struggling Americans IRS programs designed to assist delinquent taxpayers facing financial difficulties.”

In a previous review of the program, Nina Olson, the independent National Taxpayer Advocate, said, “Taxpayers who are unrepresented and vulnerable are disproportionately likely to be contacted by PCAs [Private Collection Agencies]. The median income of taxpayers whose cases are being assigned to the PCAs is significantly less than the median income of taxpayers whose cases are assigned to IRS collection personnel.”

Unlike private tax collection agencies, the IRS has several ways in which it can provide assistance to delinquent taxpayers facing financial difficulties. These include the ability to postpone, extend or suspend collection activities for limited periods of time; a flexible payment schedule that provides for skipped payments or reduced monthly payments; and an Offer of Compromise (OIC), an agreement between a struggling taxpayer and the agency that settles a tax debt for less than the full amount owed.

In other words, Kelley noted, “If you have the misfortune of dealing with private tax collectors, you cannot get a break.”

“At the end of the day, the private tax collection program does not assist taxpayers in understanding and fulfilling their obligations,” Kelley said. “This is a tax fairness issue.”

In reintroducing a bill yesterday to repeal the IRS’s authority to outsource tax collections, Ways and Means Oversight Subcommittee Chairman John Lewis (D-Ga.) reiterated that point. “In this economic downturn, taxpayers must be able to deal with the IRS directly to work through any difficulties they may encounter,” Lewis said.

Kelley, who has been leading the fight against the private tax collection program since its inception, said while private tax collectors have as their goal to collect as much money as possible, IRS employees are committed to helping taxpayers become compliant.

Several IRS commissioners have testified in Congress that IRS employees can collect far more money than private tax collectors at a lower cost. Thus far, the IRS has spent some $80 million to set up and run the program, but received only $60 million in net revenue after paying private companies $13 million in commissions.

In the context of the nation’s current economic turmoil, President Kelley said, “it is more critical than ever to end this program. The last thing people need when they already are straining under job losses and other severe economic conditions are bounty hunters breathing down their necks.”

Kelley said she agrees with President Barack Obama’s view expressed numerous times during the campaign that federal tax collection is an inherently governmental function. She added: “People need to know those who are collecting their taxes are not doing so for personal gain.”

In a response to a presidential candidate questionnaire submitted to NTEU last year, then-Senator Obama said, “We should be particularly concerned about the contracting out of something so essential to the functioning of our government as tax collection, with large risks for the violation of taxpayer privacy if the highest standards are not met.”

President Obama again supported ending the program in a Washington Post article prior to the election. The campaign wrote that “Obama will eliminate the Bush administration’s ideological bias towards outsourcing of government services and abandon initiatives, like the inefficient use of private bill collectors to collect federal taxes, that are a demonstrated waste of taxpayer money.”

And, in the Obama-Biden white paper on government reform, the candidates stated, “…federal agencies are increasingly seeking to contract out functions that should be done by the government. The privatization of IRS collection functions, military training and the administration of the GI Bill for veterans are examples of this.”

Kelley said an independent review—if conducted objectively—will once again lead to the inescapable conclusion the program is a costly failure and should be ended promptly. “We do not know, however, the details of the review and are concerned as to whether it will be fair,” she said.

“Another review of this program, including such key aspects as its high cost, its continuing inability to meet revenue goals and its adverse impact on vulnerable taxpayers, will show once again that private tax collectors fail on every account when compared with IRS employees,” said Kelley.

The Treasury Department today sent notice to contractors that it has asked an “independent third party to review the overall effectiveness” of the private tax collection program. The review and Treasury’s analysis of the results are expected to take 30 days.

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments, including more than 90,000 in the IRS.