A nonpartisan public policy institute that is part of Congress has published a report on the Internal Revenue Service’s Private Collection Agency program, detailing its history and sharing the pros and cons of using private companies to collect on debts owed by taxpayers to the federal government.
The IRS in late September awarded contracts to three private collection agencies — Coast Professional, CBE Group, and ConServe. CBE and ConServe were holdovers from the original contract award when the IRS revived the Private Collection Agency program after Congress passed a law requiring it to do so.
Without the Private Collection Agency program, “little or none of the tens of billions of dollars in the IRS’s inventory of inactive but collectible individual tax debt would ever be collected,” the report notes. Private agencies are also “likely to be more efficient than the IRS in collecting this debt.”
At the same time, the IRS might be better served collecting the debt on its own, the report says. The IRS could hire its own collectors, which might be more cost-effective than outsourcing the process, and the IRS has flexibility that the private collection agencies don’t, such as the power to “reach installment agreements with or extend offers in compromise to taxpayers who cannot pay off their debt all at once,” according to the report. Earlier this year, an audit called out the agencies for taking commissions on payments that were made outside of formal payment arrangements, but the IRS rejected the recommendation and said it believed it was complying with the law by allowing the agencies to do so.
The report also notes that critics have claimed the Private Collection Agency program “imposes economic hardships” on low-income taxpayers. The IRS has faced scrutiny
