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Washington, D.C. – The misguided congressional mandate that the Internal Revenue Service turn American taxpayers over to private debt collection agencies has so far cost $10 million more than it brings in, according to the latest report from the National Taxpayer Advocate.

The private tax debt collection program, which was restarted in April 2017 after two previous failed attempts, has cost $45.5 million to administer but has resulted in collections of $35.4 million through March 15, the report states.

“How much more proof do we need that replacing the professional civil servants of the IRS with for-profit collection agents working on commissions is a bad financial decision for the U.S. Treasury?” National Treasury Employees Union President Tony Reardon said. “Congress, which has already raised concerns about the program’s cost and disproportionate burden on lower-income taxpayers, should cancel this program immediately.”

The report states that about 2 percent of the dollars assigned for collection have been collected thus far.

“According to the IRS, the (private debt collection) program generated net revenue in Fiscal Year 2018 but has yet to break even,” wrote Nina Olson, the National Taxpayer Advocate. The office is an independent IRS watchdog that reports directly to Congress on ways to improve IRS operations and policy.

The report also highlights the unfair treatment of lower income taxpayers who are too often lured by the private collection agents into payment plans that they cannot afford. Of the taxpayers put into payment plans by the private collectors, 45 percent had incomes below 250 percent of the federal poverty level and 43 percent had income lower than their allowable living expenses.

The Taxpayer Advocate was so concerned about this finding that it issued a directive this past April that the IRS stop assigning cases where the taxpayer had income below 250 percent of the federal poverty level.  The House of Representatives also voted overwhelmingly to exclude taxpayers whose incomes are less than 250 percent of the federal poverty level from referral to the private collectors.

“The (private debt collection) initiative as implemented does not involve any financial analysis and thus does not take into account any of these taxpayers’ specific facts and circumstances,” the report states. “For lower income taxpayers, the consequence is that they are not paying for things they need. They are not meeting their basic living expenses.”

NTEU has endorsed legislation from Rep. John Lewis (D-GA), and Sen. Ben Cardin (D-MD) to repeal the congressional mandate that the IRS outsource collection work to for-profit companies and allow the trained professional civil servants of the IRS to do their job. The bill numbers are H.R. 2171 and S. 2425.

NTEU represents 150,000 employees at 32 federal agencies and departments.