Federal Manager's Daily Report

An inspector general audit has raised new concerns regarding use of private debt collection companies to collect delinquent taxes, including that too many employees of those companies “have access to taxpayer banking information, which increases the risk of fraud.”

The report is the latest in a series of evaluations of the program, which was revived in 2017 after several prior similar programs were abandoned out of concerns that tax collection should be only a governmental function. The current program, like the prior ones, involves accounts that the IRS is not actively pursuing for collection.

It said that the IRS has assigned to the four participating companies some 3.3 million taxpayer accounts totaling more than $30 billion in delinquencies, resulting in net income to the IRS—after commissions to the companies and other costs of the program—of about $346 million. In addition, the companies have established more than 130,000 payment arrangements, although “taxpayers later defaulted on more than half of them.”

It noted that a 2019 law made changes including exempting taxpayers at or below 200 percent of the federal poverty level and those receiving Supplemental Security Income payments from the SSA. However, the auditors found that the methods being used to identify those meeting the first standard “may not prevent all of these taxpayers from being assigned” for collection, and that the SSA lacks the authority to pass needed information to the IRS to carry out the latter change, leaving the IRS “completely dependent” on the collection agencies to make that determination.

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