The Internal Revenue Service's outsourcing of tax debt collection is costing the IRS about $3 for every $1 it brings in, according to a report from a federal watchdog. National Taxpayer Advocate Nina Olson, head of the Taxpayer Advocate Service, said in her annual report to Congress Wednesday that the private debt collection cost the IRS $20 million in the last fiscal year and only collected $6.7 million in back taxes, the New York Times reports. The $20 million includes administrative costs as well as commissions. The private contractors—whose introduction was supported by both Democrats and Republicans—also managed to collect a 25% commission on some collections that the IRS made without them, Olson said.
Olson said the four debt-collection companies taking part in a program started last year collected less than 1% of the $920 million of the tax debt assigned to them. She said the IRS "has implemented the program in a manner that causes excessive financial harm to taxpayers and constitutes an end run around taxpayer rights protections." She also warned that the private companies are squeezing money from those who can least afford to pay, USA Today reports. Some 19% of those who paid up under the program had incomes below the federal poverty level and would have been given hardship status if the IRS had handled their cases. Olson has previously warned that the IRS is underfunded. The agency estimates it will need another $495 million to deal with President Trump's tax overhaul. (Read more Internal Revenue Service stories.)