As part of her annual fiscal year objectives report to Congress, National Taxpayer Advocate Nina Olson repeated previous assertions that the collection of taxes is an inherently governmental function and should not be performed by private debt collectors.
In addition to expressing concern over potential violations of taxpayers' rights, Olson said the outsourcing fails to save the IRS any money.
"She is concerned that the money spent on the IRS's private debt collection initiative is an inefficient use of government dollars, as IRS collection employees can collect more delinquent tax dollars at a lower cost to the government," the report stated.
The report said the IRS Automatic Collection System collects about $20 for every dollar spent on staffing, while private collection returns about $4 for every dollar spent.
An IRS spokesman said the agency has received the report and is reviewing its recommendations. He declined to comment further.
Former IRS Commissioner Mark Everson testified before the Senate Budget Committee in February that the IRS would not be able to address the cases that private collectors are handling, even with additional staffing. He said the IRS first addresses complex cases requiring unique enforcement authority.
Dan Drummond, spokesman for the Tax Fairness Coalition, which represents the private debt collectors, reiterated that point, noting the private collectors handle basic cases the IRS would not likely get to.
But Colleen Kelley, president of the National Treasury Employees Union and a vocal critic of outsourcing tax debt collection, applauded Olson's report.
"Nina Olson offers an important perspective on behalf of our nation's taxpayers that should be heeded," Kelley said in a statement. "Her often repeated concerns about this program have helped raise congressional and public awareness of both the costs involved and the inherent risks in turning taxpayers' personal information over to the debt collection industry."
One day before Olson's report was released, the House Ways and Means Committee passed the Tax Collection Responsibility Act (H.R. 3056), which would strip the IRS of the authority to enter into contracts with private debt collectors.
The bill anticipates the argument that private debt collection is necessary to close the gap between what taxpayers owe each year and what they pay. As the bill repeals private collection, it would bring in revenue through changes in expatriation taxes, increases in information return penalties, temporary increases in tax requirements for some large corporations, and other measures.
The legislation passed the committee by a vote of 23-18.
Drummond questioned the decision based on what the program has achieved thus far.
"Obviously, we disagree with the House Ways and Means Committee," Drummond said. "We strongly feel the program has been very successful. We've brought in $20 million, we have great customer satisfaction rates, we're doing all the right things -- why do they want to kill the program?"
Drummond said it is hard to tell what the fate of the legislation will be.
"Clearly this has a long way to go before it's ever enacted," Drummond said. "With the current political and legislative landscape, it's hard to say. You basically have two different tracks being taken within each chamber."
Drummond said while the House committee voted to end the private collection program, the Senate has mandated that for every private debt collector hired, an IRS employee must be hired or retrained for collection.
"We're not here to replace, nor have we replaced, one single job," Drummond said.
"We believe there is strong support in both the House and Senate for ending the IRS' use of private tax collectors," Kelley said. "Collecting taxes is a basic government function that should not be assigned to profit-making businesses …The taxpayer advocate's latest report will help continue to build support for ending this program."