Private Collection Agencies Bringing in Less Than Expected For IRS: Report

The plan to use private collection agencies to collect on debts owed to the Internal Revenue Service has brought in less than half of the estimated funds that were projected to be collected, according to a report from the Treasury Department, while also revealing that the IRS as underreported how much it is costing to manage the program by $7 million.

The agencies contracted by the IRS to collect on unpaid tax debts collected $970 million through the end of the 2020 fiscal year, which ended September 30, 2020. After the 25% commission taken by the agencies as payment for their work, $679 million has been forwarded on to the IRS, according to the report, which was issued by the Treasury Department’s Inspector General for Tax Administration. The Congressional Budget Office had projected that $1.9 billion should have been collected during that time.

To be fair, while not what the government had projected, the amount collected by the private collection agencies has increased every year since the program was re-started back in 2017. The private collection agencies have collected $6.5 million, $83 million, $213 million, and $321 million in each of the four fiscal years, compared with projections of $374 million, $470 million, $492 million, and $514 million.

“TIGTA and the IRS seem to have different views of the best way to calculate some of the program costs, but what no one disputes is that the PDC Program has helped taxpayers get back on track and brought in more than $1 billion to help fund the government,” said Kristin Walter, a spokesperson for The Partnership for Tax Compliance, in a published report.

Last year, an audit called out the agencies for taking commissions on payments that were made outside of formal payment arrangements, but the IRS rejected the recommendation and said it believed it was complying with the law by allowing the agencies to do so. The IRS has also faced scrutiny over the process through which accounts are selected to be placed with one of the private collection agencies.

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