Treasury Inspector General for Tax Administration
November 9, 2011
TIGTA - 2011-80
Contact: David Barnes
WASHINGTON - The Internal Revenue Service (IRS) has not taken collection actions on 47 percent of a statistical sample of 62 past-due tax cases that were returned when the Private Debt Collection Program ended in 2009, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).
From 2006 to 2009, the Private Debt Collection (PDC) Program collected $98.2 million from delinquent cases that were considered low-yield and therefore not generally worked by IRS employees. The IRS initially contracted with three private debt collection agencies to pursue these collection cases.
When the PDC Program was discontinued in March 2009, the IRS recalled cases with a total assessed balance of $848.5 million from the remaining contractors. TIGTA reviewed the effectiveness of collection actions taken by the IRS on taxpayer accounts returned by the PDC Program.
The IRS did not always pursue collection actions on cases returned to the IRS or analyze the best practices of the private debt collection agencies in the PDC Program for possible improvement of IRS collection practices, TIGTA found.
“The IRS must do its best to work these cases, since taxpayers who do not timely pay all their taxes create an unfair burden on taxpayers who do,” said J. Russell George, Treasury Inspector General for Tax Administration. “This sense of unfairness can erode the public’s respect for the tax system,” added George.
TIGTA reviewed a statistical sample of 62 cases returned in Fiscal Year 2009 and found that collection actions were not taken for 29 (47 percent) of the 62 cases. These cases were not selected for collection action due to collection policies and inventory assignment practices. TIGTA estimates that potentially $30.7 million in collections will remain as outstanding liabilities. In addition, TIGTA estimates that the IRS may not collect an additional $103.2 million per year, or $516 million over the next five years, from similar cases in its inventory that would have otherwise been assigned to the PDC Program.
TIGTA also reviewed a statistical sample of installment agreement cases returned during Fiscal Year 2009 and determined that no collection actions were taken for six (10 percent) of 61 cases reviewed. TIGTA estimates that potentially $58,000 in collections will remain as outstanding liabilities. Finally, the IRS did not capture or use PDC Program data and results to improve its own collection practices.
TIGTA recommended that the IRS:
In their response to the report, IRS officials partially agreed with the recommendations and stated that they have begun taking steps to address TIGTA’s concerns. The IRS implemented a process to improve balance-due case prioritization and reviewed collection agency operations to identify potential best practices. TIGTA is encouraged by the IRS’s commitment to improving case selection and prioritization processes. However, it is still unclear how the IRS would actually work lower priority cases like those eligible for the Program.
Read the report.
Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA’s internal review process to ensure that public release is in compliance with Federal confidentiality laws.
A special plugin is required to view PDF documents. To obtain the free PDF reader, please visit the Adobe web site.