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Washington D.C.—A hearing by the House Ways and Means Committee into Internal Revenue Service (IRS) use of private tax collectors has shed light on additional serious issues surrounding the ill-advised program, the leader of the union representing IRS employees said today.

“The committee hearing highlighted several inaccuracies in the claims of supporters of the program regarding such things as cost-effectiveness and customer satisfaction as well as revealing abusive treatment of multiple taxpayers by the private tax debt collectors,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU).

Kelley has been leading the fight against the IRS use of private collection agencies to pursue tax debts in exchange for a bounty of up to 24 percent of the money they collect. The Ways and Means Committee hearing last week was part of a continuing investigation into the program.

One of the inaccuracies that came to light during the hearing is the claim made by supporters of the program that the return on investment by the private collection companies is about the same as for IRS employees—at 4 to 1. But testimony by the acting IRS commissioner placed the actual return on investment by IRS employees at 13 to 1, and the National Taxpayer Advocate put the ROI for similar efforts by the IRS at 20 to 1.

President Kelley noted that one member of the committee quoted the previous IRS commissioner as placing start-up costs for the program at about $13 million; the reality, she said, is that the actual start-up costs have been close to $71 million. With the program having yielded only some $19.5 million thus far, it is unlikely to reach the break-even point until sometime next year, at the earliest.

Moreover, President Kelley said, it appears clear from early data that the debt collectors are pursuing lower-income taxpayers in large numbers. Fully 35 percent of those contacted were eligible for the Earned Income Tax Credit on their tax forms.

“This aspect should be particularly difficult for program supporters to justify,” Kelley said, “at the same time the IRS is reducing staff among its estate and gift tax attorneys and cutting both the time and scope of audits of higher-income taxpayers.”

Program supporters also put the number of complaints in the initial stage of the program at about 25. The IRS, however, using only information reported by the debt collectors, has listed at least 72 taxpayer complaints since last fall alone, including violations of the Fair Debt Collection Practices Act (FDCPA) and contract violations. This excludes any complaints about the program lodged with the Federal Trade Commission, state Better Business Bureaus or state attorneys general.

And while debt collectors claimed a 94 percent satisfaction rate among those it contacted, Government Accountability Office (GAO) testimony said the survey was not statistically valid. The survey included no responses from those who received incorrect calls.

Meanwhile, audio tapes of phone calls from collectors to taxpayers illustrated why there were numerous complaints dealing with the collectors’ demands that the taxpayer reveal his or her Social Security number prior to being told the nature of the call; other complaints involved receiving multiple calls—in one instance, 150 calls to the elderly parents of a taxpayer after the collection agency was notified he was no longer at that address; and calls made to taxpayers outside of the hours permitted by FDCPA.

All of these problems occurred, President Kelley said, despite IRS assurances that the program would operate according to strict guidelines designed to avoid these kinds of issues.

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