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Washington, D.C.— As a way to keep from increasing taxpayers’ financial distress in the current economic downturn, it is vital that taxpayers deal directly with the Internal Revenue Service (IRS) to meet their tax obligations, said the leader of the union representing IRS employees in comments to a key House committee.

In anticipation of a hearing tomorrow, President Colleen M. Kelley of the National Treasury Employees Union (NTEU) submitted testimony to the House Ways and Means Subcommittee on Oversight stating that financially-struggling taxpayers, whose cases have been turned over to IRS-contracted private tax collectors, face a disadvantage because the IRS’s misguided private tax collection program does not provide taxpayers the same options that are available when working directly with the IRS.

“Some of our most vulnerable taxpayers, including low income taxpayers, those with language barriers, the elderly and the less educated will continue to be disadvantaged as a result of the IRS’s continuing use of private collection agencies to pursue tax debts,” President Kelley said. “In a bleak economic landscape, with skyrocketing job losses, home foreclosures and rising credit delinquencies, the last step we should be taking is disadvantaging people who are among our most vulnerable taxpayers.”

With an IRS review underway and a contract renewal deadline looming for the two private collection agencies (PCAs) currently under contract to the agency, ending the private tax collection program would end a double standard for taxpayers, Kelley said. The NTEU leader noted that the IRS has a wide range of options that are unavailable to taxpayers who find themselves dealing with private tax collectors, including the ability to:

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Answer questions about filing status and balance due issues;

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Provide advice on withholding issues;

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Assist with dependent children claims;

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Fix simple math errors; and

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Extend an Offer in Compromise (OIC), an agreement between a struggling taxpayer and the agency that settles a tax debt for less than the full amount owed.

Last month, the IRS announced a number of additional steps that will allow IRS workers to better assist financially-distressed taxpayers. These include:

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Postpone, extend or suspend collection activities for limited periods of time;

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Allow for a flexible payment schedule that provides for skipped payments or reduced monthly payments; and

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Speed the delivery of levy releases for delinquent homeowners who may want to refinance or sell their homes.

In a previous review of the tax debt collection program, Nina Olson, the independent National Taxpayer Advocate, said no case can be turned over to a private tax collector in which a taxpayer is represented by a tax professional, further discriminating against lower-income taxpayers who are less likely to be able to afford representation.

Furthermore, Olson said, “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 the IRS."

President Kelley, who has been leading the fight against the private tax collection program since its inception, called federal tax collection an inherently governmental function and criticized the double standard of treating lower-income taxpayers more harshly than others.

“Public confidence that everyone is paying his or her fair share is dangerously eroded by the double standard generated when bounty hunters collect taxes from vulnerable people for profit and people who work directly with the IRS are receiving assistance that those working with debt collectors are not,” Kelley said.

It is a simple tax fairness issue, she added. “The last thing people need when they are straining under job losses and other severe economic conditions are bounty hunters breathing down their necks,” she said.

Early numbers prove that the private tax collection program is a financial flop. 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.

NTEU strongly supports provisions in the Omnibus Appropriations bill to cut off appropriations for PCAs and supports H.R. 796 introduced by Chairman John Lewis (D-Ga.) and Rep. Chris Van Hollen (D-Md.) that would repeal the IRS’s authority to use them.

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