WASHINGTON - The Internal Revenue Service (IRS) has not taken collection actions on 47

percent of a statistical sample of 62 past-due tax cases that were returned when the Private Debt

Collection Program ended in 2009, according to a new report publicly released today by the

Treasury Inspector General for Tax Administration (TIGTA).

From 2006 to 2009, the Private Debt Collection (PDC) Program collected $98.2 million from

delinquent cases that were considered low-yield and therefore not generally worked by IRS

employees. The IRS initially contracted with three private debt collection agencies to pursue

these collection cases.

When the PDC Program was discontinued in March 2009, the IRS recalled cases with a total

assessed balance of $848.5 million from the remaining contractors. TIGTA reviewed the

effectiveness of collection actions taken by the IRS on taxpayer accounts returned by the PDC

Program.

The IRS did not always pursue collection actions on cases returned to the IRS or analyze the best

practices of the private debt collection agencies in the PDC Program for possible improvement of

IRS collection practices, TIGTA found.

"The IRS must do its best to work these cases, since taxpayers who do not timely pay all their

taxes create an unfair burden on taxpayers who do," said J. Russell George, Treasury Inspector

General for Tax Administration. "This sense of unfairness can erode the public's respect for the

tax system," added George.

TIGTA reviewed a statistical sample of 62 cases returned in Fiscal Year 2009 and found that

collection actions were not taken for 29 (47 percent) of the 62 cases. These cases were not

selected for collection action due to collection policies and inventory assignment practices.

TIGTA estimates that potentially $30.7 million in collections will remain as outstanding

liabilities. In addition, TIGTA estimates that the IRS may not collect an additional

$103.2 million per year, or $516 million over the next five years, from similar cases in its

inventory that would have otherwise been assigned to the PDC Program.

TIGTA also reviewed a statistical sample of installment agreement cases returned during Fiscal

Year 2009 and determined that no collection actions were taken for six (10 percent) of 61 cases

reviewed. TIGTA estimates that potentially $58,000 in collections will remain as outstanding

liabilities. Finally, the IRS did not capture or use PDC Program data and results to improve its

own collection practices.

TIGTA recommended that the IRS:

• Ensure that Collection policy and procedures are reviewed for inventory assignment

  practices to determine if cases that otherwise would have been assigned to the PDC

  Program can be worked, or consider reinstituting the Program; and

• Evaluate private-collection agency best practices and lessons learned for potential

  improvement of IRS collection processes.

In their response to the report, IRS officials partially agreed with the recommendations and stated

that they have begun taking steps to address TIGTA's concerns. The IRS implemented a process

to improve balance-due case prioritization and reviewed collection agency operations to identify

potential best practices. TIGTA is encouraged by the IRS's commitment to improving case

selection and prioritization processes. However, it is still unclear how the IRS would actually

work lower priority cases like those eligible for the Program.