Third Party Tax Collections are Failing

That’s according to National Taxpayer Advocate Nina Olson. (I didn’t even know we taxpayers even HAD an advocate!)

The program called private tax debt collection (PDC) has been being phased in since 2006 and is due to be fully implemented this year. It was expected to bring in $1.5 billion to $2.2 billion in delinquent taxes over the next ten years with a yearly average of around $185 million. The IRS is now projecting that these were overly ambitious projections; they only expect $33 million for FY 2007.

What’s the problem? Olson says that “the IRS has placed the interests of the PDC above the interests of taxpayers and tax administration.” She further criticizes the program for failing to require the private collectors to disclose their training materials, phone scripts and overall collections plan, something that the IRS does have to do. The PDC has also been criticized for costing more and placing a greater risk on taxpayer privacy than if the job were left to IRS workers.

Those opposed to the program see the IRS’s announcement that they will not reach their projections nor show significant improvement in collections under the PDC as vindication and are calling for it to be shut down.