Home Media Center News Releases

Washington, D.C. — Six major public interest organizations have joined with the National Treasury Employees Union (NTEU) in calling on the House to approve legislation that would repeal the Internal Revenue Service’s (IRS) authority to hire private debt collectors to pursue tax debts.

In a joint letter sent today to every representative, the groups voiced their strong support for the Tax Collection Responsibility Act of 2007 (H.R. 3056), legislation the House is expected to consider tomorrow. “Privatizing federal tax collection is a waste of taxpayer dollars, invites overly aggressive collection techniques and jeopardizes the financial privacy of American taxpayers,” the groups wrote.

NTEU President Colleen M. Kelley, who has been leading the fight against the IRS contracting out program, welcomed the broad-based support. “Opposition to the program only continues to grow as more members of the public learn about its high costs and threat to their private and sensitive information.”

According to IRS documents, the program has failed to meet 2007 revenue projects by a significant amount. The companies collected $32.13 million in gross revenue through Sept. 20, as opposed to the $45.7 to $65 million projected for the year. The commissionable revenue, or revenue that the private collection agencies actually collected, as opposed to what taxpayers paid in response to letters indicating their cases were being turned over to the companies, was even less—$25.19 million as compared to projections of $43.5 million to $61.8 million.

The IRS program is “fiscally unsound,” the groups wrote, with private companies eligible to keep up to 24 percent of the money they collect. As IRS officials repeatedly acknowledged, in-house employees can perform the work at a far lower cost than private companies. The return on investment from using IRS employees is 13 to 1, while it is a significantly lower 4 to 1 from using private companies, the groups point out.

“Rather than continuing to spend money on this misguided program, we believe these funds should instead be used to hire additional IRS collection employees such as those in the Automated Collection System who generally collect about $1.49 million per employee per year,” the coalition wrote.

In addition to being unnecessarily costly, allowing private collection agencies to pursue tax debts in exchange for a bounty “flies in the face” of the IRS Restructuring and Reform Act of 1998, which “prevents employees or supervisors at the IRS from being evaluated on the amount of collections they bring in.”

The fear of using commissions as an incentive to collect taxes was recently realized when the IRS confirmed that it had received more than five dozen complaints—including violations of taxpayer privacy laws—against the private companies. In one instance, private collectors made 150 calls over the course of 27 days to the elderly parents of a taxpayer after the collection agency was notified he was no longer at that address.

Along with NTEU, the groups that signed the letter are the Consumer Federation of America; NAACP; National Active and Retired Federal Employees Association (NARFE); National Consumer Law Center; National Consumers League; and the National Council of La Raza.

This is not the first time public advocacy groups have joined with NTEU to express their concern about the IRS contracting out program. Last year, NTEU and a coalition of groups penned a joint letter to senators stressing their concerns about turning over taxpayers files to an industry “with a long record of abuse.” At the same time, the letter urged senators to support a measure that would stop the IRS private debt collection program.

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.