The Internal Revenue Service's move to send delinquent tax cases to private companies for debt collection is raising eyebrows.
Critics have charged that the move would invite abuse of taxpayers by shady companies, as well as risk personal information being misused, and cost the government more than it would to collect taxes itself.
Now a report by the Government Accountability Office (GAO) indicates that though the IRS has made progress in administering the private debt collection (PDC) program, it has failed to adequately document the costs of the program and setting targets for its success.
"[If the IRS] waits too long, [it] risks not having critical information in a timely and cost-effective manner in order to answer important questions about whether the PDC program is producing desired results at acceptable costs and whether the program should be expanded," the report said.
The GAO conducted the analysis for the Senate Finance Committee, which has been critical of the PDC program. Ranking minority member Max Baucus (D-MT) said that "Tax collection is an inherent government function and the IRS ought to take care of it in-house."
Among the GAO's findings:
• The IRS has begun, but has not completed, accurately estimating the costs of the PDC program. It claimed that historical data for the program costs was not "historically tracked," requiring the agency to assemble the data from available sources.
• The IRS will implement procedures to protect taxpayers' rights when dealing with private debt collectors, including training for collectors, extensive background investigations, and "taxpayer surveys" to get feedback on the performances of private debt collectors.
• The IRS did not have specific information on how they would use feedback from the privatization program to decide whether or not to expand it.
The IRS has estimated that the first phase of the program may net the government between $55 million and $92 million, with costs for the program around $62 million.
However, the GAO found that the IRS' figures did not account for the fees the agencies will be collecting on the taxes they bring in, as much as 24 percent from the taxes themselves.
With the fee costs figured in, the revenue figure drops to a low end of $44.1 million, well below the program's cost threshold.
IRS Commissioner Mark Everson said that he agreed with many of the findings of the GAO report, and that the IRS would be implementing many of their recommendations. Everson had recently admitted in Congressional testimony that it was less costly for IRS employees to pursue tax collection than it was to outsource it to private agencies.
The IRS has already come under fire for wasting millions in failed software upgrades that culminated in the agency dispensing $318 million in refunds for fake tax returns.
The concerns about information sharing also reminded privacy advocates of the IRS' plan to loosen the guidelines for tax preparers to sell their customers' information to third parties. Critics say that the plans could lead to increased cases of identity theft, fraud, and predatory lending.
Treasury employees and oversight organizations have accused the IRS of playing political favorites by reducing staff in areas that cover high-stakes cases such as business and corporate audits, while rewarding politically-connected companies with the contracts for the private debt collection program.