IRS private tax collectors may be paying off

The last time the IRS used private firms to collect unpaid debt it ended up in net loss of almost $4.5 million, but this time around the agency had a $55.33 million gain.

There was a lot of push back when the IRS decided to again use private collection agencies, or PCAs, to collect unpaid taxes because of previous failed attempts and privacy issues, which is part of the reason why the Treasury Inspector General for Tax Administration performed an audit of the revived program.

“Two prior IRS attempts at using the PCAs did not succeed. This audit was initiated to evaluate the IRS’s planning and implementation of the PDC program as well as initial program results,” the audit states.

It found that the IRS developed effective policies and procedures for the PCAs, a program metrics to gauge performance, and brought in more than the costs of implementing the program.

As of May 31, 2018, the total program revenue ($56.62 million) was approximately $1.3 million more than costs ($55.33 million).

However, as of June 2018, the four PCAs charged with colleting the debt only collected 1 percent of the $4.1 billion they were assigned; a study commissioned by the collection industry trade association showed the national collection average for 2016 was 9.9 percent.

The report made several recommendations to improve the program’s efficiency as well taxpayer rights, including ensuring the IRS website informs taxpayers of their rights, creating a complaint panel and using social media to better inform taxpayers of the collection program.

Read the full report here.

Reader comments

Sun, Nov 4, 2018 David E. Ogden, Utah

One big crock of dog doo-doo (if you will). Private collection companies still underperforming AND there is no possible way that they can give the Value-Added Service & Support that employees of the Internal Revenue Service are capable of giving, period. Mr. President and Congress -- have you ever thought of developing metrics for that? No? Yah, that's what I thought!

Fri, Nov 2, 2018

What a misleading banner you have here regarding tax collectors. Should have read $4.5 million loss vs $1.3 million gain. Seems like a small return for the effort. What could IRS have collected with $55 million extra dollars?

Thu, Nov 1, 2018

How can you tell these tax collectors from con artists?

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Edward A. Zurndorfer Certified Financial Planner
Mike Causey Columnist
Tom Fox VP for Leadership and Innovation, Partnership for Public Service
Mathew B. Tully Legal Analyst

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