The  program enabled IRS to contract with private collection agencies to  collect tax debts and pay them from a revolving fund of the revenue  collected. These objectives do not include terms used in the objectives stated in  table 1, such as applying tax laws consistently with collection practices  while they introduce new terms such as compliance, safety and security,  and fairness and respect. However, we found that IRS’s reporting  on the PDC program to Congress did not provide complete, quality  financial information on some of the program’s results for revenue  collected and costs. While suggesting this positive program balance to the Treasury,  the report did not clarify that about $50.9 million of the $88.8 million went  to the Treasury and about $37.8 million went to the two IRS special  funds—about $18.9 million for each—to pay current and future related  IRS costs (see table 2 in appendix II). According to these fiscal year 2018 data, more  than 95 percent of the 17,000 cases—involving $183 million in tax debt— were returned because the collection agencies indicated that:  they were unable to collect on the debt or contact the taxpayer, or  the taxpayer received Social Security supplemental or disability  income payments (which are to be returned because these taxpayers  have limited resources or ability to pay, according to IRS officials),  asked the collection agency to cease contact, or had died. Similarly, by not analyzing new types of cases that could be assigned to  private collection agencies, IRS could miss opportunities to assign cases  that collect more revenue than cases that these agencies currently return  with little or no revenue. For example,  IRS did not identify in the risk register the risk that taxpayers may agree  to debt payments they cannot afford. For example, IRS  identified certain taxpayer risks with a focus on: giving taxpayers an opportunity to agree to pay their tax debts through  a series of payments rather than the effects on taxpayers if they are  unable to make all payments; and harming IRS’s reputation if collection agencies do not follow IRS  standards rather than clarifying any specific risks to taxpayer rights. As a result, IRS does not have reasonable assurance that  it has fully identified and addressed all taxpayer risks from the PDC  program. Select Risk Response

IRS has developed many responses to broadly address taxpayer risks in  the PDC program, but has not clearly documented and aligned the  responses to address specific risks. Our interviews with external stakeholders from practitioner groups and  groups that represent taxpayer interests indicated that IRS had not  offered them clear opportunities to provide feedback. IRS Has Identified Scams as a Risk, but Has Not Identified and Assessed Other Program Fraud Risks

IRS identified scams as a risk to the PDC program and taxpayers. Furthermore, because IRS does not  have plans to analyze data to identify ways to improve the results of the  PDC program by using its discretion to revise the types of tax debt cases  it sends to collection agencies, IRS risks continuing to send cases to  collection agencies that incur costs but collect little or no revenue. (Recommendation  4)
The Commissioner of Internal Revenue should analyze PDC program  results and the cases not assigned to the PDC program to identify the  types of inactive cases IRS will not pursue that could be assigned to  collection agencies to improve PDC program results. Of our twelve recommendations, IRS partially  agreed with one and disagreed with two. Further, as discussed in the report, IRS’s  stated objectives did not acknowledge all key PDC program risks, such as  scams and high costs compared to revenue collected. IRS disagreed with our recommendation that IRS include TIGTA costs in  reporting program costs (Recommendation 2). Finally, although IRS agreed with our recommendation that it report the  amount of collected revenue sent to the general fund of the Treasury and  amounts retained by IRS to pay its costs (Recommendation 3), IRS said it  disagreed that its reports to Congress on the PDC program have not  provided complete financial information and said such reporting followed  statutory requirements. Appendix I: Objectives, Scope, and Methodology

The objectives of this report were to assess the extent to which the  Internal Revenue Service (IRS) has (1) documented Private Debt  Collection (PDC) program objectives and measures; (2) documented data  on PDC revenue collection and cost results, and used these data to  improve the program and meet its objectives; and (3) addressed PDC  program risks to prevent or address scams or other harmful effects on  taxpayers. To assess the extent to which IRS documented PDC program objectives  and measures, we reviewed PDC program management documents and  interviewed IRS officials—including the Director of Headquarters  Collection and the PDC Program Manager—to identify the stated  objectives and proposed measures to support identification of program  risks and assess program performance. We also reviewed PDC program performance data  on quality reviews, taxpayer satisfaction, and taxpayer complaints to  understand how IRS monitors taxpayer risks and responses.
Why GAO Did This Study

IRS attempts to collect tax debts to promote tax compliance but does not have resources to pursue all debts. A 2015 law required IRS to contract with private collection agencies for certain tax debts. However, stakeholders such as the National Taxpayer Advocate have noted that safeguards are needed to protect taxpayers from risks, such as scammers impersonating collection agencies.
GAO was asked to review IRS's PDC program. This report assesses the extent to which IRS (1) documented program objectives and measures, (2) documented revenue collection and cost results data, (3) used data to improve the program and meet its objectives, and (4) addressed risks to prevent or address scams and other harmful effects on taxpayers. GAO analyzed IRS's documents on PDC program administration and planning; collections and costs reporting; and managing risks. GAO interviewed officials from IRS and external groups that represent taxpayer interests.

What GAO Found

The Internal Revenue Service (IRS) documented objectives and proposed measures for its private debt collection (PDC) program for sending tax debt cases to private collection agencies, but the objectives are not clearly defined and their linkages with program measures are unclear. For example, one objective is to provide taxpayers an opportunity to understand and resolve their tax debts, but the proposed measure focuses on taxpayer satisfaction with collection agencies rather than taxpayers' understanding. The objectives also do not include some key program risks, such as scams. Without clearly defined objectives and measures, IRS will have limited ability to assess program results.
IRS's reports to Congress on the PDC program have not provided complete financial information. For example, as of September 2018, IRS reported program revenue collections of about $89 million and costs of $67 million, suggesting a positive balance of $22 million for the general fund of the Treasury (the Treasury). However, the report did not clarify that about $51 million collected went to the Treasury and the remaining $38 million were retained by IRS in two special funds to pay current and future program costs. Without this information, Congress has an incomplete picture of the program's true costs and revenues.
IRS has not analyzed PDC program results to identify the types of cases that should not be assigned to collection agencies because they do not result in collections. GAO's analysis of IRS data shows that between April 2017 and September 2018 about 73,000 of 111,000 cases closed by collection agencies had little or no revenue collected because the collection agencies were unable to contact the taxpayer or collect the debt, among other reasons. Given the costs associated with managing these cases, without such analyses, IRS may continue to use resources inefficiently and assign cases with little or no potential for revenue collection, or miss opportunities to assign other cases that could produce more revenue.
IRS has identified and taken steps to mitigate some PDC program risks that could harm taxpayers. However, IRS has not completed the process of identifying and documenting all risks nor has it fully assessed risks to taxpayers from the program or its response to these risks. Specifically, GAO found that
IRS identified and documented 6 taxpayer risks related to the PDC program, such as scammers impersonating collection agencies, but had not identified an additional 10 risks that GAO did, such as taxpayers agreeing to debt payments they cannot afford.
IRS had not consistently assessed the impact or likelihood of the identified risks. As a result, IRS's responses to mitigate risks were broad in nature, and were not prioritized or aligned to address specific risks.
IRS monitors a sample of collection agencies' telephone calls with taxpayers and reviews taxpayer complaints, but these methods do not provide information on whether IRS's responses to risks are effective.
Without addressing these risk management issues, IRS cannot ensure it has fully identified PDC program risks and effectively responded to protect taxpayers from them.

What GAO Recommends

GAO makes 12 recommendations, including that IRS improve PDC program objectives and measures, revenue and cost reporting, analysis to assign cases, and management of taxpayer risks. IRS agreed with nine recommendations, partially agreed with GAO's recommendation on improving objectives—which GAO clarified in response—and disagreed with two recommendations to include certain costs in reporting and analyze data to identify cases not collectible. GAO maintains the recommendations would more fully report PDC program federal costs and prevent waste.