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TIGTA finds problems with private tax collection levels, payment plans and security


Four years ago, Congress forced the Internal Revenue Service to again use private collection agents (PCAs). This third deal with debt collectors came after the IRS ended two previous arrangements when they proved to be, shall we say, problematic.

Now it looks like the current IRS PCA collaboration also has some issues.

Low collection rate: A recent Treasury Inspector General for Tax Administration (TIGTA) report says that the private tax debt collectors currently under IRS contract have brought in just a fraction — 1.79 percent of the total value of accounts — of the $30 billion in unpaid tax they've been assigned since 2017.

In dollars, that's a mere, in government financial terms, $498.4 million from the 3.28 million accounts the bill collectors have been allotted since 2017.

IRS data also shows that the agency has incurred approximately $193.7 million in PCA-related costs since the program's third iteration went into effect. This amount includes just under $98.6 million (51 percent) resulting from commissions paid to the PCAs.

That translates into net IRS revenues from the private debt collection (PDC) program of approximately $345.6 million since inception of the program.

Payment plan problems: Those amounts are troubling enough, but it gets worse.

The PCAs also established more than 130,000 payment arrangements, notes the TIGTA document issued at the end of 2020, as a way for tax debtors to pay off their IRS bills over time.

However, more than half of the taxpayers who agreed to payment plans later defaulted.

Security concerns, too: TIGTA also found a potential security risk.

The report notes that "too many PCA employees have access to taxpayer banking information, which increases the risk of fraud."

That's a disconcerting lapse for an agency that's focused much of its attention in recent years on efforts to reduce tax identity theft. So the IRS is taking TIGTA's security note seriously.

"We make safeguarding sensitive information and protecting taxpayers from fraud a priority," wrote Eric Hylton, commissioner of the IRS' Small Business/Self-Employed Division, in response to this TIGTA finding.

He also told the IRS watchdog that:

"While there are safeguards in place to protect against misuse of this information, we will review the procedures for acquiring bank information as it relates to pre-authorized direct debit payments to determine whether modifications are warranted. We will also update our procedures to have the quality reviewers monitor to ensure telephone background noise cannot be heard in order to further protect taxpayer information."

What PCAs do well: And there was some good news for the private tax debt collectors.

"PCAs continue to perform well on telephone calls in terms of quality metrics," according to the report. "The four PCAs are averaging 99.4 percent for quality, and each PCA individually has a quality score close to 100 percent."

And in a random sampling of calls, the report found that, "In general, assistors followed guidance and provided taxpayers with quality service."

Recommendations made, rejected: Overall, TIGTA made seven recommendations on how to improve the PCA program efficiency and protect taxpayer rights. The IRS agreed with two of the suggestions and disagreed with five.

The IRS said it plans to review the private tax collectors' procedures during its annual security review to ensure compliance with applicable security measures in establishing pre-authorized direct debit payments.

Additionally, the IRS said it will update the Policy and Procedure Guide and PDC Operations Guide, as well as conduct reviews to ensure that the private sector collection agents protect against potential disclosure of taxpayer information.

By the Numbers: The TIGTA report also provided the ol' blog with a plethora of numbers for this week's By the Numbers feature. After careful consideration, I'm going with 1.79 percent.

That's the minuscule percentage noted earlier in this post that the private agencies collected from the total value of unpaid tax accounts they were assigned.

The ostensible goal of this latest PCA experiment was for the for-profit collectors to fulfill the IRS' core tax collection job better than paid federal employees.

Based on the TIGTA findings, these private debt collectors need to do much better, while working, of course, within taxpayer protection and security parameters.

If they can't, then they need to go the way of their predecessors.

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