The Internal Revenue Service has rejected a recommendation from an auditor that recommended the private collection agencies stop being paid commissions when accepting payments outside of formal payment arrangements, saying that it believes it is complying with the law by allowing the agencies to do so.
The Treasury Department’s Inspector General for Tax Administration released a report last month detailing its assessment of the performance of the four private collection agencies [PCAs] — CBE Group, Performant, Pioneer, and ConServe. The TIGTA is required to conduct a biannual audit of the agencies’ performance as part of the Fixing America’s Surface Transportation Act, which greenlighted the program for placing unpaid tax debts with the private agencies. Through mid-May, nearly 3.3 million accounts had been placed with the four agencies, and $539 million had been collected, out of a total amount of unpaid debt of $30.1 billion. Pioneer had the best collection rate at 1.84% of amount placed, followed by CBE Group at 1.83%,ConServe at 1.78%, and Performant at 1.71%.
The private agencies are required to request payment in full from taxpayers and if that is not possible, then to offer a payment arrangement that provides for full payment during a period of not longer than seven years. Under those conditions, the agencies are allowed to retain 25% of what they recover.
In 2019, the IRS revised the guidelines, allowing agencies to accept payments outside of a formal payment arrangement. The guidelines were also changed to allow the agencies to retain their 25% commission on those payments as well.
It is interesting to note that Performant was cited as the only agency of the four which effectively conveyed the details of unstructured payments to consumers.
Between August 2019 and May 2020, about 7,700 individuals had promised to make unstructured payments. More than half had not made any payments, about 20% made one payment, and 26% made multiple payments.
The auditor had some harsh words for the IRS’s decision.
“By paying PCAs commissions on taxpayer voluntary payments which are not part of a qualified tax collection contract, the IRS is again finding a way to work around the plain meaning of the language in I.R.C. § 6306 for the benefit of PCAs, as it did previously when the statute allowed installment agreements of only 60 months but the IRS worked around the language to allow 84-month installment agreements. Our tax administration system depends on taxpayer voluntary compliance with the tax law as it is written and enacted, and the IRS should do the same.”
