IRS Paid Private Debt Collectors $20 Million To Get $6.7 Million From Low-Income Americans
The Internal Revenue Service (IRS) reportedly spent $20 million of taxpayer money to hire private debt collectors to recover $6.7 million in unpaid taxes from low-income Americans (video below).
According to a report by the independent Taxpayer Advocate Service, the IRS sometimes paid private collection collectors for work that was not even done.
The IRS hired the private collection agencies in 2015 to help recover an estimated $450 billion in unpaid taxes.
Nina Olson of the Taxpayer Advocate Service said the IRS was supposed to make sure that private debt collectors targeted taxpayers who “have an adequate means to provide for basic expenses,” repairs USA TODAY.
Instead, 19 percent of Americans targeted by private debt collectors had incomes below the federal poverty level, a median income of $6,386.
Twenty-five percent of the people targeted by the private debt collectors had incomes below 250% of the federal poverty level, a median income of $23,096.
The Taxpayer Advocate Service noted the IRS should have given low-income taxpayers hardship status and classified their debts as currently uncollectible, but instead the IRS handed low-income people over to private debt collectors.
Olson noted in the report that the Taxpayer Advocate Service tried to stop the IRS from their failed mission:
No one is making the IRS make these bad decisions. The harm to these taxpayers is something IRS leadership consciously decided to do despite my personal efforts, and those of my organization, to stop it.
…Thus, it does not appear that the (private-collection agencies) are particularly effective in collecting the debts assigned to them. In any event, the cost of the (private debt collection) program thus far exceeds the revenue it generates.
The IRS also spent money to produce a video to warn taxpayers how to recognize legitimate private debt collectors who will be contacting taxpayers after the IRS notifies taxpayers that they will be contacted by private debt collectors.