A comprehensive audit of the activities of four private collection agencies (PCAs) tasked with going after unpaid taxes owed to the Internal Revenue Service has revealed that the agencies are collecting 1.6% of what has been placed, despite having customer satisfaction scores.
The report, from the Treasury Inspector General for Tax Administration (TIGTA), laid out 13 recommendations to improve efficiency and protect taxpayers. The IRS agreed with nine of the recommendations and has announced corrective action plans to be put into place with the four agencies.
While profitable, in terms of the total amount collected versus the amount it has cost the IRS to operate the program, the $88.8 million that has been collected as of Sept. 13 is a drop in the bucket of the $5.7 billion that has been placed with the four agencies — CBE Group, Performant, Pioneer, and ConServe. CBE has collected 1.8% of what has been placed with the agency, Pioneer has collected 1.6%, ConServe 1.5%, and Performant 1.4%. However, the average age of each account placed with one of the four agencies is 4.75 years, according to the report, which is one reason why the collection rate might be as low as it is.
About half of all payment arrangements established by the four agencies are not being honored, according to the report, and the right-party contact rate for the four agencies is averaging 5.8%.
One issue noted in the report is a discrepancy in the payment arrangement calculators being used by the four agencies. The calculators being used by the agencies are not taking other potential fees, such as interest and penalties, into proper consideration when determining amounts to be paid via payment arrangements.
Among the recommendations made by the report are:
- Require collection agencies to reduce background noise and the potential disclosure of taxpayer information that might be overheard from other conversations.
- Update the disclosures given by collectors prior to the taxpayer being authenticated to include a cell phone disclosure.
- Have the collection agencies provide training to reduce hold times while they calculate monthly payment options for individuals who have agreed to a payment plan.
- Develop a consistent payment arrangement calculator for all four agencies.
- Update collection letters to include language to inform taxpayers that they may need to make additional payments beyond the initial agreed-upon terms.
A spokesperson for a trade group representing the four agencies provided the following statement in a published report:
“First, TIGTA’s report covers program data from half a year ago, so it’s important to note that in the intervening six months many of the concerns raised have already been overcome,” said Kristin Walter, a spokesperson for the Partnership for Tax Compliance. “For example, the IRS has already addressed the calculation concerns the report discusses and has fixed the IRS online payment portal that was making it difficult for taxpayers to make their payments. The IRS has also recently added new payment options ‒ like the ability to set up recurring electronic payments ‒ which eases a taxpayer’s ability to stay current on their account. While the IRS has the discretion to send newer, more viable debts to the PCAs, the statute requires the IRS to assign PCAs all of the debts that have essentially been abandoned by the agency due to their age. And, as the report demonstrates, older tax debts are much more difficult to collect as taxpayers’ contact information may have changed or they have relocated. Thus, PCAs are helping the government sift through a mountain of debt they otherwise would not collect or even try to collect – so far resulting in the collection of $88 million in federal revenue previously thought to be uncollectible (through September 2018 – data through the end of 2018 will be released shortly). The PDC program is successful because it works with taxpayers to determine manageable payment amounts that allow tax debts to be resolved over time. As the program moves forward, the revenue collected will grow exponentially as taxpayers continue making payments on their current installment plans and new installment plans begin.”