Washington Post, Private Tax Collection Agencies Lose Money While Going After the Poor:
In its zeal to privatize important parts of the government, the Republican-controlled Congress directed the Internal Revenue Service to use private debt collectors for certain tax delinquencies, a program that began last year.
The Obama administration cautioned against the use of bill collectors before legislation authorizing the program passed in 2015. Those warnings went unheeded.
Now, the program is losing money and unfairly hitting the poor.
The National Taxpayer Advocate Service, an independent office within the IRS, says using private bill collectors “has yet to generate net revenues, continues to unnecessarily burden taxpayers experiencing economic hardship and produces installment agreements with high default rates.”
In a report to Congress last week, Taxpayer Advocate Nina E. Olson said the private debt collection program “has yet to break even. About 2 percent of the dollars assigned for collection have been collected thus far.”
Starting in April 2017 — when the IRS began assigning tax debts to private collectors — through March 15, the effort collected $35.4 million, almost 29 percent less than the $45.6 million the program cost. ...
“Since the IRS implemented the private debt collection (PDC) initiative last year,” Olson wrote in a blog last month, “I have been concerned that taxpayers whose debts are assigned to private collection agencies (PCAs) will make payments even when they are likely in economic hardship — that is, they are unable to pay their basic living expenses. … This is exactly what has been happening.” ...
Fortunately, Congress is aware of the private tax collection problems for the poor. In April, the House unanimously approved legislation that would exempt those with very low incomes from private collection. Olson called on the IRS to follow that lead and administratively “exercise its discretion” by focusing the program on “those who can afford to pay, instead of people who, by the IRS’s own definition, cannot afford to pay.”