GAO Report Reveals Debt Pool for IRS Private Debt Collectors

A report from the Government Accountability Office (GAO) shows that the potential pool for private debt collection agencies working on behalf of the IRS is much larger than amount that has been forwarded so far to two collection agencies working on the limited implementation phase of the program, proponents of the program say.

The report, succinctly titled “TAX DEBT COLLECTION: IRS Has a Complex Process to Attempt to Collect Billions of Dollars in Unpaid Tax Debts,” was released in June by the GAO. In it, the GAO reports that in Fiscal Year 2007, some $3.5 billion in IRS debt accounts were shelved due to lack of resources to pursue the debtors.

But the Tax Fairness Coalition, a Washington-based group that lobbies on behalf of the two collection agencies on the contract – CBE Group and Pioneer Credit Recovery – said that the IRS has only forwarded around $1 billion to the agencies for collection since the program began in September 2006.

“At a time when uncollected tax debt at the IRS is at a 10 year high, we cannot afford to let billions of dollars simply fall off the books at the expense of taxpayers,” the coalition said in a statement.

Jeff Trinca, a spokesman for the coalition, noted that the GAO report conflicts with one of the findings in a recent report from the National Taxpayers Advocate, Nina Olson. She said in her report that the log of easier cases that are in the private debt collectors’ purview are “drying up,” (“IRS Taxpayer Advocate Ramps Up Criticism of Private Debt Collection Program,” July 10).

“A lot of those shelved accounts are small balance accounts, so there’s no way there isn’t enough work to send to the private companies,” said Trinca. He also said that easy cases aren’t drying up, it’s that the IRS can’t keep up with the pace of the collection agencies.

In addition to the $3.5 billion in IRS that was shelved last year, the GAO report found that some $22 billion in accounts, out of a potential collectible pool of $105 billion, were in queue waiting for assignment to the IRS’ various collection stages. The report called these accounts “Potentially collectible inventory in a non-active collection status.”

The Tax Fairness Coalition would like to see the IRS implement the full collection as planned. The private debt collection initiative was supposed to expand to 10 collection agencies earlier this year, but political pressure prevented the IRS from moving forward.

“The IRS Private Debt Collection Program continues to bring in millions in uncollected tax debt to help close the tax gap, a number that will grow exponentially if the program is expanded as originally intended,” the coalition said.