The Tax Times: Private Debt Collection Agencies Collected 2% on Tax Debts

Thursday, February 14, 2019

Private Debt Collection Agencies Collected 2% on Tax Debts

The private collection agencies that contract with the Internal Revenue Service to collect long overdue tax debts were able to garner only about 2 percent of the taxes owed on the more than 700,000 taxpayer accounts assigned to them since 2017, according to a new government report.

The report, from the Treasury Inspector General for Tax Administration, found that as of September 2018, the PCAs collected approximately $88.8 million of the balance owed on those taxpayer accounts. They also set up more than 21,000 payment arrangements with delinquent taxpayers, but the taxpayers later failed to make payments on more than half of them.

The disappointing results had been predicted by opponents of the private debt collection program. The IRS has twice before tried out private debt collection programs, but later canceled them after they collected far less tax revenue than anticipated, while prompting complaints from many taxpayers of harassment from debt collectors.

Despite warnings from the National Taxpayer Advocate and the National Treasury Employees Union, the IRS was forced to establish another private debt collection program after Congress passed the FAST Act, a highway funding bill that contained some tax-related provisions, in December 2015.

The IRS awarded contracts in April 2017 to four private debt collection agencies: the CBE Group of Waterloo, Iowa; ConServe of Fairport, New York; Performant of Pleasanton, California; and Pioneer of Horseheads, New York. The IRS set up some stringent requirements this time around to try to prevent the debt collection agencies from harassing taxpayers and to discourage them from contacting taxpayers by phone, out of fear that they might be confused with scammers pretending to be calling on behalf of the IRS.

Both the IRS and the private collection agencies monitor performance using various attributes such as procedural accuracy and professionalism. All of the PCAs performed well under these attributes, according to the TIGTA report, which is the third one to be issued since the program was restarted.

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.”

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