On the heels of some negative publicity private companies have received in the aftermath of two controversial issues over at the IRS - regarding a decision to change the rules governing the privacy rights of citizen's tax return information and a new program outsourcing collection of overdue taxes - more bad news came out of the Government Accountability Office (GAO) yesterday for paid tax preparation companies such as H&R Block.

During a Senate Finance Committee hearing yesterday on the costs of filing tax return, the GAO shared some fairly shocking results from a study they did on the accuracy of returns completed by private tax preparers. The report showcases results of GAO investigators who used a paid preparer to file their tax returns and found that the returns suffered from errors and "willful or reckless disregard of tax rules." (read highlights of the report or the entire report.)

GAO also found of the 19 tax returns in the study, the preparer made major mistakes in eight of them, awarding extra refunds in excess of $2000 in six of the cases and in two of the cases, costing the taxpayer over $1500. The other returns also contained moderate to serious errors and showcased imcompetence on the part of the preparer. Had these been actual tax returns, the preparation company would be subject to fines and penalties according to the IRS - but only if the IRS spotted the errors.

Kind of makes you want to file your own tax return this year, huh?

Following up on a previous posting from last week, an article that ran yesterday in govexec.com reported that two private collection companies have filed a complaint with the General Accountability Office (GAO) protesting the selection of a third firm (Linebarger Goggan Blair & Sampson) to receive a contract to collect outstanding taxes owed to the IRS.

Apparently a former partner with Linegarger Goggan Blair & Sampson pleaded guilty in 2004 of bribing San Antonio City Councilmembers in return for contracts to collect overdue city fees. The good folks at Diversified Collection Services of Livermore, CA and GC Services of Houston, TX think the IRS should have taken that into more consideration than they did in awarding contracts (read: you should have picked us). Those two groups were not selected for contracts by the IRS, but have said their protest seeks merely to understand the selection process and how it was implemented.

I'm sure the fact that the companies selected for contracts would be able to keep up to 25 percent of the taxes they collected has nothing to do with their disappointment in losing out on the contracts and this simply is a quest for the truth! (hmph!)

This isn't chump change we're talking about either. The IRS has admitted hiring private firms to collect the taxes costs significantly more for the government than simply hiring more staff at the IRS to collect the revenue themselves. As Rep. Steve Rothman angrily pointed out during an appropriations hearing last week, ""The IRS wastes up to 25% on commissions to private collection agencies rather than save more than $30 million [each year] by hiring federal employees to do the work instead."

It's amazing lengths private companies are willing to go to in order to drag skeletons out of the closet when $30 million is put up for grabs. This outsourcing plan seems to be working perfectly - a true vision of efficiency!