IRS Private Debt Collection Program Pays Off

Last week Senator Chuck Grassley (R-IA) highlighted an IRS report that shows its current Private Debt Collection program is now cash positive, after one year of operation. The controversial program has come and gone over the years (decades, actually), as some have argued it costs more money than it brings in – though supporters would say the measurements used by the critics were flawed.

Mandated by the Fixing America’s Surface Transportation Act, or “FAST Act" signed in late 2015, this will be the third attempt at such a program by the IRS. Earlier programs occurred in 1996 and 2006.

In 2017, Senator Grassley said this about the problem of outstanding IRS debt:

“According to the Government Accountability Office (GAO), the IRS has more than $130 billion of debt on its books. This so-called inactive debt is sitting in limbo until a 10-year window of enforcement closes the collection window for good.”

At the time, he also explained that the design of the current program incorporated measures to differentiate it from the many scams that were (and continue to be) prevalent.

“Firewalls are in place to protect taxpayers. First, taxpayers would be notified by mail that their outstanding debt has been turned over to a private debt collection company. Second, all payments are required to be processed directly by the IRS, not through third parties. The private debt collection program is another tool for the IRS to collect taxes that are owed and not in dispute.”

And he suggested that (then nominee) Treasury Secretary Steve Mnuchin was in agreement about the plan.

The report issued last week by the IRS shows that the private debt collectors have brought in more than $56 million in tax revenue, with costs totaling approximately $55 million. Grassley said,

“Contrary to critics’ claims and despite its slow-roll out, the IRS private debt collection program is already demonstrating that it can more than pay for itself with revenues returned to the Treasury. The most recent data shows revenue returned to the Treasury exceeds all associated program expenses, including 2016 and 17 set-up expenses. A program that works as it should is a rarity in the federal government.”

Accounts have been distributed equally among the four contractors, with each receiving just about 32,000 (or approximately $230M in receivables) in 2017 and 93,000 (or approximately $793M in receivables) in 2018.

CBE Group has led the group in installment agreements entered and total dollars collected, though at $7,000, Performant has generated the highest dollar commitment per installment agreement (vs. CBE's $6,500).