Large Firm Skills
With Small Firm Service

TIGTA: American taxpayers default on over half of payment plans

On Behalf of | Jan 4, 2021 | Federal And State Tax Collections |

The Treasury Inspector General for Tax Administration (TIGTA), the IRS’s watchdog, has issued a report on the state of tax collections through private debt collectors contracted by the IRS.

The IRS has assigned private collection agencies over $30 billion in unpaid taxes to collect. The collection agencies have only succeeded in collecting about $500 million of that debt. They have also established over 130,000 payment arrangements with taxpayers, but over half of those are in default.

The IRS has been contracting with private collection agencies to collect tax debt since 2015. A law passed that year required the IRS to begin using private collection agencies to attempt to collect on inactive tax debts.

Previously, the IRS tried using private debt collectors but had to shut the program down. The debt collectors failed to bring in the revenue they promised, and they were accused of taxpayer harassment. Currently, the IRS uses four debt collection agencies (CBE Group, Performant, Conserve and Pioneer) and TIGTA performs a biannual assessment of the program.

The Taxpayer First Act, signed into law last year, also made some changes to IRS tax debt collection. It added some protections for low-income tax debtors and increased the maximum length of installment agreements.

Irregularities in the program

According to TIGTA, the four debt collection agencies are performing well on quality metrics, averaging close to 100%. However, TIGTA also found that the IRS allowed private debt collectors to take commissions on unstructured payments to the IRS. The Tax Code does not allow private debt collectors to arrange for unstructured payments; they may only set up qualified collection contracts with debtors.

The TIGTA report expresses concern that when debt collection agencies take unstructured payments, it bypasses the IRS’s safeguards that require a review of the taxpayer’s financial situation. Bypassing that review increases the chance that taxpayers will be in financial hardship and default on their payment arrangements.

Moreover, taxpayers who have tax levies against them are not supposed to be assigned to private debt collection agencies. Nevertheless, TIGTA found 14,586 taxpayers with levies who were being pursued by private debt collectors.

The IRS accepted only two of TIGTA’s seven recommendations that were meant to protect taxpayers’ rights and improve the efficiency of the private debt collection program. It agreed to review the debt collectors’ procedures annually to ensure the agencies are protecting taxpayers’ secure information as they establish pre-authorized direct debit payments. And, it will conduct reviews of the agencies to protect against the disclosure of taxpayer accounts.

If you have been contacted by a private debt collection agency about a tax debt, you still have rights. Talk to a tax attorney about your options.