IRS Spends $20 Million to Collect Less Than $7 Million in Tax Debts

IRS Spends $20 Million to Collect Less Than $7 Million in Tax Debts

New report outlines issues taxpayers face when dealing with the IRS, and finds programs that are wasting taxpayer money.

Coming off of the highly successful (or apocryphally disastrous, depending on which side of the political horse race you are riding in) tax reform bill recently passed by Congress, we received this startling piece of news about the efficiency of one of our trusted government agencies.

The Taxpayer Advocate Service is an independent organization within the IRS, that according to its website says it is our “voice at the IRS,” and strives to “ensure [we] are treated fairly.” The report shows the agency shelled out approximately $20 million to paid private debt collectors in 2017 to recoup a total of $6.7 million in debts owed the government.

To add to the embarrassment, the report also states that the private debt collectors, in some cases, were paid as much as a 25 percent commission on debts collected by the IRS themselves, without the assistance of the independent debt collectors.

And according to the report, that is just one of the “serious” problems at the IRS.

The primary section of the annual report outlines the 21 most serious problems encountered by taxpayers when dealing with the IRS, which include an outdated telephone service, erroneous reporting of audit rates, and the possibility depriving a taxpayer of his passport without regards to their rights to appeal or address grievances.

The report contains some disturbing statements about the use of private collections agents. The IRS, with direction from Congress, will exclude taxpayers from collection if they would suffer hardships and be unable to maintain basic living expenses with the enforcement of the payment of their tax debt, but the private collection agencies do not appear to be following that rule as well.  The report’s analysis found 45 percent of the collections were from such taxpayers, including many who were recipients of Social Security Disability payments.

In its conclusion on that particular problem, the report states, “the most vulnerable taxpayers are making payments and entering into installment agreements they cannot afford according to the IRS’s own measures.  The IRS should honor its commitment to taxpayers and do more to ensure that its PDC program operates in accordance with the law and respects taxpayers’ rights.”  With this most of us would wholeheartedly agree.

But even more alarming, the report includes the following statement concerning the payment of commissions to private collection agencies.  “The IRS is aware that it is paying commissions to Private Collection Agencies (PCAs) with respect to work done by the IRS, but has no plans to change its procedures to attempt to identify payments that were clearly not attributable to PCA action.”

In other words, the IRS knows it is wasting taxpayer money, but has no plans to address the problem.  This is totally unacceptable and the agency’s management needs to be called on the carpet to ask why. Kudos to the Taxpayer Advocate Service for pointing this out, but government agencies should not wait for an annual report to act to eliminate waste and misuse of taxpayer dollars.

The IRS has suffered funding cuts, as have many federal agencies, but before asking for additional funding, each agency should be identifying opportunities to slash wasteful spending and operating more efficiently with the funding they currently have.

Tax reform was sorely needed, but we should also strive for agency accountability to give the taxpayers the most bang for their bucks also.  The heads of the IRS should be implementing procedures to address all of the issues noted in the report, and Congress should put all other government agencies on notice to do the same.  Waste, misuse of funds, and indifference simply cannot be tolerated.

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