IRS Private Debt Collectors Make Deals That Don’t Always Pan Out

The four private companies retained by the Internal Revenue Service to go after longtime tax delinquents have shown progress in gaining taxpayer trust, but are not always accurate in figuring penalties or successful in policing payment follow-up.

That’s according to the latest statutorily required assessment of the controversial private debt collection program Congress mandated in 2015—released quietly at the end of December during the partial government shutdown.

As of last September, the IRS had assigned more than 700,000 taxpayer accounts to private collectors, who had brought in some $88.8 million, or 2 percent of the balance owed, according to the Treasury Inspector General for Tax Administration. The firms also negotiated more than 21,000 payment arrangements, “but taxpayers later failed to make payments on more than half of them,” the audit noted.

All four of the companies “performed well” under measures such as “procedural accuracy and professionalism,” the report said, noting customer satisfaction rates above 90 percent.

The CBE Group had the most case resolutions with 23,007, while ConServe, Pioneer and Performant had 21,096, 20,470, and 18,795, respectively. All four accomplished a similar percentage of full payment resolutions, TIGTA reported, with the CBE Group generating a larger number (6,390) and Performant generating the least (1,774).

“However, the performance attributes focus almost entirely on the [private collectors’] telephone conversations with the taxpayers and do not measure other important aspects of case management, such as returning cases to the IRS when required and the accuracy of payment arrangements,” auditors concluded. Collectors for both the IRS and the private firms are required to measure performance on such issues as contacting the right parties, properly identifying themselves and informing the taxpayers of their rights.

Most dramatically, the companies’ calculations of payment terms for 92 percent of the arrangements were inconsistent with the IRS’ own payment rubrics, with payment deadlines differing on average by more than four months, or, in some cases, four years, the report said. “TIGTA sampled 100 such arrangements and determined that 65 percent differed by at least one month.”

IRS monitoring also identified issues of “mishandling of age accounts and procedural errors on payment arrangements.” The tax agency gave the four firms more than 60 recommendations.

TIGTA determined that improving the payment process could both increase the companies’ revenue and reduce the number of defaulted agreements. Some taxpayers willing to pay were unable to do so because of technical problems with the IRS’ varying payment options.

TIGTA made 13 recommendations to improve program efficiency and protect taxpayer rights. IRS managers agreed or partially agreed with nine and plan corrective actions.

An example of disagreement came in TIGTA’s recommendation that the IRS prohibit the private collectors from asking taxpayers to borrow money from friends or family to get right with the tax agency. “The IRS stated that in many situations, this type of borrowing can be in the taxpayer’s best interest,” the report noted. The IRS disagreed that “merely asking a taxpayer if he or she could borrow money from friends or family and recording the occurrence of this suggestion” by the companies amounted to an unethical collection of financial data from “non-liable parties.”

The report on a program that has many skeptics in Congress and that got off to a slow start was welcomed by the nonprofit Partnership for Tax Compliance, which advocates for the private debt collectors.

“TIGTA’s report covers program data from half a year ago, so it’s important to note that in the intervening six months, many of the concerns raised have already been overcome,” a spokeswoman told Government Executive via email. And as IRS managers know well, the program is designed to focus on the “older tax debts,” which are “more difficult to collect as taxpayers’ contact information may have changed, or they have relocated,” she added.

The program is built on “collaboration,” the partnership said, and 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.”