Internal Revenue Service:

Issues Affecting IRS' Private Debt Collection Pilot

GGD-97-129R: Published: Jul 18, 1997. Publicly Released: Jul 18, 1997.

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Lynda D. Willis
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Pursuant to a congressional request, GAO summarized the key issues GAO discussed during its May 13, 1997, briefing on the Internal Revenue Service's (IRS) pilot program, which was established to test the use of private collection companies to assist IRS in collecting delinquent federal taxes, focusing on key issues affecting the implementation of IRS' pilot program.

GAO noted that: (1) IRS' efforts to design and implement the private debt collection pilot program were hindered by limitations that affected the program's results; (2) one set of limitations involved the effect of certain legal interpretations on the contracts with private collection companies; (3) specifically, the Office of Management and Budget and IRS consider the "collection of taxes" to be an "inherently governmental" function that must be performed by government employees; (4) therefore, the program's private collectors were hired to assist IRS only in locating and contacting taxpayers to remind them of their outstanding tax liability and to suggest various payment methods; (5) under IRS' interpretation, the collectors were barred from actually collection the funds to settle delinquent accounts; (6) another IRS legal interpretation barred collectors from being paid a percentage of the amount of taxes collected as a result of their efforts; (7) a second set of limitations involved IRS' reliance on its computer systems and procedures, which made it difficult to identify, select, and transmit collection cases to private collectors; (8) in addition, IRS computer systems and technology and the inability to transfer data from one service center to another impeded IRS' ability to refer cases to the collectors; (9) during the pilot, the number and types of cases referred to the collectors were significantly different from those anticipated in the pilot program's original design; (10) the final issue GAO discussed in its May 13 briefing involved the pilot program's measurement plan, which did not include a comparison of the best practices used by the private collectors with IRS' own collection techniques; (11) part of Congress' intent in approving the pilot was for IRS to learn more about collection techniques used in the private sector; (12) IRS' measurement plan identified two performance measurement factors: (a) gross financial gain measured by total dollars collected versus total costs to collect; and (b) net financial gain measured by total dollars collected minus dollars expected to have been collected without intervention versus total costs to collect; (13) the written design did not include mechanisms to identify and capture information on successful collection techniques used by the contractors that could be adopted by IRS; and (14) according to IRS officials, they are currently developing procedures to identify which practices worked well during the pilot so that they can be compared with IRS' current practices and appropriate changes can be recommended.

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  • tax icon, source: Eyewire

    Priority Open Recommendations:

    Internal Revenue Service
    GAO-20-548PR: Published: Apr 23, 2020. Publicly Released: Apr 30, 2020.

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