Thread by @MLACitation

Recent report on the effectiveness of private debt collectors for overdue taxes : treasury.gov/tigta/auditrep…

There is so much going on in this

This link is just the executive summary but still includes things like..

"As of May 31, 2018, total program revenue ($56.62 million) was approximately $1.3 million more than costs ($55.33 million)"

" Also, some IRS policies may be harmful to taxpayers, such as:

· A complaint process that is dependent on private debt collectors reporting on themselves."

"Authentication procedures that needlessly expose taxpayers to risk."

My favorite

"Other IRS policies may present risks to tax compliance, such as:

· Some payment terms do not comply with the letter of the law."

That one is just like "one downside is that some parts are illegal"

And the end,

"TIGTA made several recommendations to improve program efficiency and protection of taxpayer rights. Although the IRS took some corrective actions during the audit, IRS management disagreed with most of the recommendations"

Even more fascinating is the full report which includes things like

"The Joint Committee on Taxation estimated that the Act’s PDC authorization would yield
approximately $2.4 billion in additional revenue through Fiscal Year (FY) 2025"

First attempt at using private debt collection: 1995, canceled after 12 mos after losing $17 mil

2006: second attempt goes slightly better but sees high startup costs and gets canned after net losses

In 2012, IRS budget was $12 bil, but they had 6 bil in debt considered uncollectible. Maybe explains reasoning for trying it so much

Part of the report says that handing your SSN out over the phone is such a bad idea, that they excluded victims of identity theft from being under the range of accounts provided to private debt collectors. Lol

Probably because they're the ones most educated now to be like "what stop calling me"

April 2017: ~500k accounts assigned to private collectors worth ~4bil

56 mil has been collected, 1% of total. Extra 95 mil has been set up in payment agreements but not included in main numbers yet since ...probably a weak promise

Rate of collection for IRS was nearly 10%. In fairness to private collectors, they had accounts that were 4 years old on average which is considered nearly uncollectable

Private collectors get a 20% cut

This time around, IRS seems more interested in this working than previous attempts (using startup costs in long term decision-making around program viability is weird). Also, they have less money

The 4 agencies that got contracts

• CBE Group
• ConServe
• Performant
• Pioneer

Each one had to provide a plan proving how they'd operate and list out subcontractors. They were 17 subcontractors (not for interaction but for running letters)

Hitting send now but getting to the juicy part in a sec

Now to the complaints section

They fixed the first complaint: taxpayers can allocate payments to a debt in a specific way ("apply this payment to the oldest debt ") and lost that right when interacting with private places. This was remediated

Second complaint: it was recommended that IRS sends low priority *new* debt from small businesses to collection agencies. This is OK to do under the law, was shot down by management

Across the country, the FTC receives the most complaints about debt collectors in general. 29%

9500 people called an IRS help line specifically about private debt collection and the IRS and got voicemail saying to call the collector

Lol voicemail also says to search the IRS site for private debt collection but returns results for the failed 2006 program (remediated)

The highest percent of complaints was actually by private collector employees after being threatened with violence by tax(non)payers

Second highest complaint was info disclosure

44% of complaints were from one of the four companies. But it's self-reporting, so it's either the worst company or the best one?

"The IRS is reluctant to staff a referral unit because the associated costs will make the initiative less profitable."

In the section on the IRS improperly sending debt of people in disaster areas to private collectors

My favorite section header:

"The PDC program communication strategy contradicted previous IRS
communications regarding the tax scam environment "

A butterfly flaps its wings

"Additionally, beginning in 2013, scams involving individuals impersonating IRS collection personnel in telephone calls to taxpayers (and more recently via e-mail) have developed into the largest scam in the IRS’s history"

If the real collectors found $50 mil and the scammers found $50 mil, maybe we are paying the wrong guys

"Since October 2013, ... about 10,000 victims have paid a combined total of more than $54 million"

Who is running this clown car

"The IRS could use the Internet and social media more effectively. For example, the IRS.gov website previously referenced a YouTube.com public service announcement that was not actually on YouTube.com."

private collection program has this weird two factor auth mode where the second factor has the same convenience and flaw as texted codes

You need to remember some weird ID number from the first letter a collector sends you. If you forget that, its OK because you can give your address and DOB, which then allows the collector to provide you with the last 4 of your SSN. Lol

They recommended that the IRS set up a complaint panel and the IRS basically said "yeah well, you set up the complaint process originally so no take-backs"

Re last tweet:

"IRS management disagreed with this recommendation. The IRS stated that TIGTA’s OI designed the current complaint process."

Follow up

"Office of Audit Comment: TIGTA’s OI also recommends the creation of a complaint panel."

Ohhh snap IRS fired back about the YouTube video! They said it was there but the link was broken. Why is this in this

IRS disagreed with the recommendation to set up a phone line where someone can reach a human to verify the private debt collector.

Really disheartening

This is so sad. It looks like the only reason this thing is profitable on the third run is because they're ignoring everything good

"IRS management disagreed with both prohibiting the PCAs from authenticating taxpayers by using SSNs and discontinuing telephone calls when taxpayers do not have their TAN"

Keep exposing SSNs, don't get off the phone until you do

I got it slightly wrong earlier: a would-be scammer needs to recreate the first 5 of the SSN, then is given the unique part by the citizen

"However, the IRS has indicated
a preference to have as little to do with taxpayer accounts as possible once they are assigned to the PCAs."

One moral of the story is to pay on time or get assigned to the worst queue

Still going: "IRS policy is to not commit further resources to any cases returned by the PCAs. In the 2006 initiative, the IRS collected more on cases returned by the PCAs as uncollectible than all of the revenue brought in by the PCAs."

Speculating, but I wonder if people were willing to pay the IRS after dealing with a private collection agency because the experience was much better. Bad cop PCA vs IRS?

"Throughout the audit, the IRS expressed concerns about adding costs to the initiative that might have the effect of undermining it."

Taxpayers will be beaten until morale improves

Collection agencies can decide to return a case to the IRS if all reasonable efforts are exhausted. Its subjective -- one of the four companies only returned 2% of its cases even though each company got an even load

No incentive to return early since they only get paid on collection. No timeout rules either. 50+% accounts are tagged low income

Because the IRS refuses to look at accounts that come back from collectors, there seems to be no punishment for people that are willingly not paying taxes

Chaotic evil moral of the story is that you can wait long enough and never need to pay your bill

"There should be consequences for taxpayers who demonstrate willful noncompliance to pay their taxes. However, these taxpayers are not held accountable because the IRS refuses to work any cases that are returned from the PCAs."

Lol

> IRS operational reviews reflect that one of the PCAs refers to missed payments as “broken promises.”

Agencies given too much power

"Once a taxpayer’s account is assigned to a PCA, all future noncompliance issues will also become the purview and responsibility of that PCA."

Ew part 1

"The law permits the assignment of inactive *tax receivables* to the PCAs. IRS PDC program policies and procedures appear to have assigned *taxpayers* to the PCAs so that future noncompliance becomes a problem for the PCAs to solve.

Part 2

"In fact, throughout this audit, IRS personnel have described the assignment of “entities” to PCAs as opposed to accounts."

IRS wrote a whitepaper describing a workaround that lets them approve payment plans set up by private collectors that exceed the legal limit. Technique is actively used and still allows for commission (remediated, slightly)

The information a collector finds, like the current telephone number for an account, isn't shared back with the IRS

Business accounts will be assigned to private collectors in march 2019

IRS partially agreed with the idea of putting a timeout on how long someone can be assigned to a collector

IRS disagreed with recommendation to prioritize debt forwarded to agencies. Filtering to remove 50% low income, 70% without a filed return in the last year

IRS disagreed with making collection agencies provide update information back up to the IRS because it would be too much work

"Management disagreed with requiring the PCAs to provide
updated information to the IRS because it would need to build the capability to incorporate the information."

Despite all of this, the program internally is considered a success

>90% satisfaction rate across the 4 companies, although collection method is odd/biased

Automatic dialers are prohibited, but the wording in the report makes it seem like fake compliance. It sounds like the dialing is automatic but involves humans in the same way you shake your mouse to keep the screensaver away.

Gonna stop for now to go to work. Lots of important stuff in this though