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General government: IRS Tax Debt Collection Contracts (2020-22)

The Internal Revenue Service could potentially collect millions of dollars in additional revenue and save federal costs by analyzing tax debt cases to make better decisions on the types of cases it assigns to contracted private collection agencies.

Year Identified: 2020
Area Number: 22
Area Type: Cost Savings & Revenue Enhancement

3 Total Action(s)

Action 1
Partially Addressed

The Commissioner of Internal Revenue should finalize the private debt collection program objectives so that they are clearly defined in consistent terms, and assure that the key program risks, measures, and targets are linked with the objectives.

Type
Executive Branch
Last Updated
August 31, 2021
Progress:

IRS partially agreed with GAO’s March 2019 recommendation and has taken some steps to implement it. In December 2019, IRS provided new program objectives linked with proposed measures to assess the performance of collection agencies. In March 2021, IRS said it intends to start using these measures in September 2021. Although finalizing the program objectives represents progress, IRS’s approach only assesses individual collection agencies’ performance rather than the program performance in achieving its objectives.

To fully address this recommendation, IRS needs to document the overall program performance being assessed with performance measures linked to program objectives as well as key risks and targets for the measures.

Implementing Entity:
Internal Revenue Service
Action 2
Not Addressed

The Commissioner of Internal Revenue should analyze private debt collection (PDC) program results to identify the types of cases that are not potentially collectible and should not be assigned to collection agencies.

Type
Executive Branch
Last Updated
August 31, 2021
Progress:

No executive action taken. IRS disagreed with GAO’s March 2019 recommendation to identify the types of cases that are not potentially collectible. IRS said such analysis is unnecessary because the law requires IRS to assign all such cases to collection agencies. IRS also noted assigning cases costs IRS little. However, GAO’s report noted that IRS has the discretion to define cases that are potentially collectible and those that are not. IRS has responsibility for efficient program operations, which includes not assigning uncollectible debt cases.

IRS reaffirmed its position in March 2021 that the assignment and recall of cases adds little to its costs. However, IRS has not supported this assertion. IRS incurred some portion of its PDC costs from assigning and recalling cases that collected no revenue. Even if these costs are minor, they would be greater than collecting no taxes owed for cases not referred to collections agencies.

GAO maintains the importance of this recommendation because IRS has incurred tens of millions of dollars in costs with little or no revenue collected for most of the PDC cases that IRS has closed. Without data analyses to guide the types of cases sent to collection agencies, IRS may continue to use resources inefficiently.

Implementing Entity:
Internal Revenue Service
Action 3
Not Addressed

The Commissioner of Internal Revenue should analyze private debt collection (PDC) program results and the cases not assigned to the private debt collection program to identify the types of inactive cases the Internal Revenue Service (IRS) will not pursue that could be assigned to collection agencies to improve PDC program results.

Type
Executive Branch
Last Updated
August 31, 2021
Progress:

No executive action taken. IRS agreed with GAO’s March 2019 recommendation and noted that it already had the recommended analyses built into the PDC case identification process. In March 2021, IRS repeated its view that its process already identified other inactive cases that have not been assigned to PDC.

IRS provided documentation during the review and in December 2019 to support its view. However, this documentation did not show how IRS analyzes its debt inventory or PDC results to identify inactive cases that are not being assigned to PDC but may be worth pursuing. Without such analyses, IRS may miss opportunities to assign cases that collect more revenue than cases that collection agencies return with little or no revenue collected.

Implementing Entity:
Internal Revenue Service
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