In 2015 Congress passed a law mandating that the IRS use private contractors to collect $138 billion owed in back taxes and fines owed to the agency. The program did not work as planned, with the IRS spending $20 million to collect a paltry $6.7 million in back taxes during the last fiscal year. According to The New York Times, the program started in April, and the government hired four agencies to collect debts totaling $920 million. The Taxpayer Advocate Service flagged the massive waste of money in a report that details the failings of the private debt agencies to make any dent in collecting back taxes.
The report stated, "the I.R.S. has implemented the program in a manner that causes excessive financial harm to taxpayers and constitutes an end run around taxpayer rights protections." In some cases, the agencies received a 25% commission for collections they had nothing to do with. In other cases, they ignored guidelines meant to protect taxpayers who have fallen on tough times attempting to collect money from people who could barely afford basic living expenses. 45% of the collections came from people "whose incomes fell below the minimum threshold, including those who received Social Security disability payments."
The report blames some of the issues facing the IRS on a lack of funding, but says "lack of resources often has become a reflexive excuse for not doing something, or worse, for doing things “to save resources” that harm taxpayers, foster noncompliance, and undermine taxpayer and employee morale."
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