	Tax Administration: IRS Tax Debt Collection Practices

Madam Chairman and Members of the Subcommittee: We are pleased to be here today to assist the Subcommittee in its review of the Internal Revenue Service’s (IRS) tax debt collection practices. Every year IRS successfully collects over a trillion dollars in taxes owed the government, yet at the same time tens of billions more remain unpaid. It is this latter group whom IRS must deal with in its efforts to collect delinquent taxes. In doing so, IRS faces several significant challenges, including a lack of accurate and reliable information on either the makeup of its accounts receivable or the effectiveness of the collection tools it has at its disposal, as well as receivables that are often years old, out-of-date collection practices, and antiquated technology. It is these problems and challenges—and their results—that led us, the Office of Management and Budget (OMB), and IRS to recognize IRS’ accounts receivable as a high-risk area. Of the approximately $200 billion currently in the IRS accounts receivable inventory, IRS data shows that approximately $63 billion represents taxes that, although they have been assessed, may not be valid receivables, but rather are “place markers” for compliance actions. who have taxes withheld from their wages. Existing IRS computer systems do not provide ready access to needed information and, consequently, do not adequately support modern work processes. Potential Benefits of Using Private Debt Collectors

the use of private law firms and debt collection agencies to help collect delinquent tax debts. Private collectors, however, can perform collection-related activities, such as locating taxpayers and attempting to secure promises to pay. improve its collection programs. Currently, IRS is making some changes to its collection process as a part of its modernization effort. Additional copies are $2 each.
Why GAO Did This Study

GAO discussed the Internal Revenue Service's (IRS) tax debt collection practices.

What GAO Found

GAO noted that: (1) each year, billions of dollars in taxes remain unpaid; (2) impediments to improving tax debt collection include the lack of accurate and reliable accounts receivable data and effective collection tools and programs, a backlogged receivables inventory, outdated collection processes, and antiquated computer systems; (3) some accounts receivable may be overstated, not valid, or owed by deceased or unlocatable taxpayers and defunct businesses; (4) IRS is modernizing its information and processing systems, but these actions will not be completed for several years; (5) although IRS use of private debt collectors could increase tax collections by locating and encouraging taxpayers to pay their delinquent taxes, they cannot actually collect taxes; (6) some states have successfully used private debt collectors to increase their delinquent tax collections; (7) IRS accounts receivable have been designated a high-risk area, but IRS cannot make major changes in its business operations by itself; (8) IRS needs a comprehensive strategy to guide its efforts to improve tax debt collections, starting with having accurate and reliable information; and (9) IRS could adopt private industry practices and use private debt collectors in some collection-related activities.