From the U.S. Government Accountability Office, www.gao.gov Transcript for: IRS and Private Debt Collection Description: In this podcast we’re talking about how the IRS uses private debt collection companies to collect on some tax debts. Related GAO Work: GAO-19-193: Tax Debt Collection Contracts: IRS Analysis Could Help Improve Program Results and Better Protect Taxpayers Released: April 2019 [ Background Music ] [ Jessica Lucas Judy: ] This program is working much better than prior attempts, and has a lot of promise for IRS being able to make better use of its resources. [ Matt Oldham: ] Welcome to GAO's Watchdog Report, your source for news and information from the US Government Accountability Office. I'm Matt Oldham. In 2015, Congress passed a law requiring IRS to send some tax debts to private collection agencies. I'm with Jessica Lucas Judy, a Strategic Issues director at GAO. And she's here to talk about her report that reviewed the IRS's private debt collection program. Thank you for joining me, Jessica. [ Jessica Lucas Judy: ] Thanks for having me. [ Matt Oldham: ] So do we know how much tax debt ends up with private agencies? [ Jessica Lucas Judy: ] So every year there's about $50 billion to $52 billion in unpaid tax debt that the IRS considers potentially collectible, but they can't go after all of it themselves. In April 2017, they started this program, The Private Debt Collection Program, with the simplest cases. And by the end of 2018, they had assigned over 700,000 cases. By the end of 2019, they expect to assign about 2 million cases. [ Matt Oldham: ] So how come the IRS isn't collecting all of their debts? [ Jessica Lucas Judy: ] They have a limited number resources that they can put into enforcement. And so they prioritize the cases that they have, they tend to focus on the ones that have a higher dollar amount or that they're just more likely to be able to collect. So Congress had instructed them to set up this program to go after the inactive cases, the ones that were potentially collectible but that they weren't pursuing. [ Matt Oldham: ] So has it been successful so far, privatizing some of these collections? [ Jessica Lucas Judy: ] Definitely in comparison to prior attempts to have a private debt collection program, this one's been more successful. So, for example, in 1997, GAO reported that a private debt collection program IRS was using at the time had cost $21 million and had collected about $3 million. They tried again in 2006, but had to stop that one a few years later, again, because it wasn't considered to be cost-effective. So through the end of September 2018, IRS reported spending $66.5 million on this private debt collection program and they'd collected $88.8 million. So the program is bringing in more than it costs. [ Matt Oldham: ] Was there any concern with the IRS using these private debt collection agencies and protecting our information, the taxpayers? [ Jessica Lucas Judy: ] It's definitely a concern. It was a concern for IRS and for the Congress and for GAO. For example, the Treasury Inspector General had reported that more than 10,000 taxpayers were scammed out of $55 million between 2013 and 2017 by people pretending to be collectors from the IRS. Now, this is not related to The Private Debt Collection Program, but just in general that phone scam that people get where somebody says, "I'm with the IRS, you have to pay. Give me a gift card." And so this was definitely a concern when they were setting up the program. The IRS did do a good job of identifying a lot of potential risks and building in some -- some protections, but we found some places where there were some risks that they hadn't identified yet and we thought they could do more. [ Background Music ] [ Matt Oldham: ] It sounds like since the IRS doesn't have the resources to pursue all debts, they're turning to private agencies for help. And there is some concern about protecting taxpayers from scams. [ Matt Oldham: ] Jessica, did your report recommend ways the IRS could keep taxpayers safe and collect on their debts? [ Jessica Lucas Judy: ] We did. We made 12 different recommendations in the report, some of them having to do with identifying risks and also with how they manage the program. So, for example, I mentioned that they'd collected $88.8 million, but that represents less than 2% of potentially collectible debt that had been assigned to the private agencies. And so we thought there might be some ways that the IRS could analyze the information that it's getting on the debt collect cases that are coming back and figure out are there some more likely to be collected than others; could they make better use of this resource? [ Matt Oldham: ] Final question: What do you believe is the bottom line of this report? [ Background Music ] [ Jessica Lucas Judy: ] Bottom line is that this program is working much better than prior attempts at having private debt collection and has a lot of promise for IRS being able to make better use of its resources. We just think there are a few more things that IRS could do to help improve the program. [ Matt Oldham: ] Jessica Lucas Judy is a Strategic Issues director at GAO and she was talking about her report on an IRS program to send some tax collection to private companies. Thank you for your time, Jessica. [ Jessica Lucas Judy: ] Thank you. [ Matt Oldham: ] And thank you for listening to The Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts. For more from the Congressional watchdog, the US Government Accountability Office, visit us at GAO.gov.