Tax Debt Collection: Measuring Taxpayer Opinions Regarding
Private Collection Agencies (23-MAY-07, GAO-07-890T).
Every year the Internal Revenue Service (IRS) does not collect
tens of billions of dollars in delinquent taxes. In 2004,
Congress authorized IRS to use private collection agencies (PCA)
to help collect some of these debts. To ensure that taxpayers are
treated properly and that the program achieves the desired
results, IRS contracted with a consulting company to perform a
survey of right party contacts--those individuals who confirmed
their identity and tax debt to PCAs over the telephone. The
consulting company reported overall taxpayer satisfaction ratings
from 94 to 96 percent for contacts made from November 2006
through February 2007. At the request of the Chairman, House
Committee on Ways and Means, GAO attempted to obtain, for the
period September 2006 through February 2007, the number of tax
debt cases IRS referred to PCAs, right party contacts who were
offered the taxpayer survey, and right party contacts who took
the survey. GAO was also asked to report any other key
observations related to the PCA program and taxpayer survey. To
perform this work, GAO collected information and interviewed
officials from IRS, the consulting group that administered the
survey, and the PCAs.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-890T
ACCNO: A69851
TITLE: Tax Debt Collection: Measuring Taxpayer Opinions
Regarding Private Collection Agencies
DATE: 05/23/2007
SUBJECT: Debt collection
Delinquent taxes
Program evaluation
Statistical methods
Surveys
Tax administration
Tax consultants
Taxes
Taxpayers
Data collection
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GAO-07-890T
* [1]Background
* [2]PCA Program Data, Survey Data, and Key Related Findings
* [3]Contacts and Acknowledgments
* [4]GAO's Mission
* [5]Obtaining Copies of GAO Reports and Testimony
* [6]Order by Mail or Phone
* [7]To Report Fraud, Waste, and Abuse in Federal Programs
* [8]Congressional Relations
* [9]Public Affairs
Testimony
Before the Committee on Ways and Means, House of Representatives
United States Government Accountability Office
GAO
For Release on Delivery
Expected at 10:00 a.m. EDT
Wednesday, May 23, 2007
TAX DEBT COLLECTION
Measuring Taxpayer Opinions Regarding Private Collection Agencies
Statement of Gregory D. Kutz, Managing Director
Forensic Audits and Special Investigations
GAO-07-890T
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to discuss issues related to private
collection agencies (PCA). Because the Internal Revenue Service (IRS) does
not collect billions of dollars of delinquent taxes each year--at the end
of fiscal year 2005, it estimated that $132 billion in delinquent debt
with some collection potential had gone uncollected--it supports the use
of PCAs to enhance its existing collection mechanisms. In 2004, Congress
authorized IRS to use PCAs to help collect tax debts in certain cases.^1
Based on that authority, in 2006, IRS contracted with three PCAs as a
pilot program.^2 Before referring cases to PCAs, IRS sends notification
letters to the taxpayers explaining that their cases will be handled by a
PCA. Once cases are referred, PCAs must first notify taxpayers of their
collection efforts by letter, and are then allowed to contact the
taxpayers via telephone.^3 Individuals who are properly authenticated over
the telephone are known as right party contacts.
According to IRS, in the first 7 months of the pilot program, PCAs helped
IRS collect about $19 million in tax debt from right party contacts--over
$3 million of which was paid to the PCAs under the terms of their
contract. As we have previously reported, in addition to the collection of
tax debt, providing for the proper treatment of taxpayers is a critical
factor in ensuring that the PCA program achieves desired results.^4 In
order to measure taxpayer opinion and gauge PCA performance, IRS
contracted with a consulting company to perform a taxpayer survey of right
party contacts. Starting on November 27, 2006, the consulting company
administered an automated telephone survey to right party contacts
transferred to a survey line by the PCAs. Based on this automated survey,
the consulting company reported that taxpayer satisfaction with PCAs was
94 percent for November/December 2006, 94 percent for January 2007, and 96
percent for February 2007.
^1American Jobs Creation Act of 2004, Pub. L. No. 108-357, S 881, 118
Stat. 1418 (codified at 26 U.S.C. 6306) (2004).
^2Contract in this case refers to task orders issued to the three PCAs
under their existing United States General Services Administration federal
supply schedule contracts.
^3If an authorized representative is designated on an individual's tax
return, for example, a legal representative, such as a Power of Attorney,
the PCA is required to contact the representative rather than the
individual taxpayer. For the purposes of this report, all references to
taxpayers are defined as either individual taxpayers or their
representatives.
^4See GAO, Tax Debt Collection: IRS Is Addressing Critical Success Factors
for Contracting Out but Will Need to Study the Best Use of Resources,
[10]GAO-04-492 (Washington, D.C.: May 24, 2004). Also see GAO, Tax Debt
Collection: IRS Needs to Complete Steps to Help Ensure Contracting Out
Achieves Desired Results and Best Use of Federal Resources,
[11]GAO-06-1065 (Washington, D.C.: Sept. 29, 2006).
Given the importance of ensuring that taxpayers are treated properly, at
your request, we attempted to obtain, for the period September 2006
through February 2007, the number of cases IRS referred to PCAs, right
party contacts who were offered the taxpayer survey, and right party
contacts who took the survey. We were also asked to report any other key
observations related to the PCA program and taxpayer survey.
To perform our work, we collected data and interviewed officials from IRS,
the consulting group that administered the survey, and the three PCAs. We
also reviewed the statement of work for the contract between IRS and the
consulting company, and contract between IRS and the three PCAs. IRS,
PCAs, and the consulting company told us that the data they provided are
accurate. Because we did not independently verify the data, we cannot
offer an opinion on its reliability or accuracy. We did not attempt to
compare the PCA program with other forms of debt collection or evaluate
the performance of the program itself. In addition, based on our
discussions with IRS and the entities involved in this program, we have
included key observations related to the PCA program and taxpayer survey.
These observations illustrate areas of concern and are not intended to
offer a comprehensive analysis of the PCA program. At your request, we
focused our work on the period September 2006 through February 2007. We
conducted our work from April 2007 through May 2007 in accordance with the
President's Council on Integrity and Efficiency's Quality Standards for
Investigations.
In summary, we found the following:
o According to the PCAs, 37,030 tax debt cases were referred by
IRS from September 2006 through February 2007. PCAs reported
making contact with, and authenticating the identity of, 13,630 of
the individuals whose cases were referred. Because the taxpayer
survey was not offered until the end of November 2006, 6,793 of
these right party contacts were eligible to take the survey--about
50 percent of all right party contacts made since September 2006.
^5
^5Right party contacts made from November 27, 2006, through November 30,
2006, are not included in this figure, although they would have been
eligible to take the survey.
o According to the consulting company, the validity of the survey
was based on the key underlying assumption that all right party
contacts would be offered a chance to take the survey. However, we
could not obtain the number of right party contacts offered the
survey because not all PCAs kept records on who was offered the
survey. Additionally, the three PCAs used different methods to
offer right party contacts the survey. For example, one PCA told
us that the survey was offered to all right party contacts, unless
the PCA representative was aware of certain limiting circumstances
(e.g., the individual was contacted while driving). Another PCA
told us that taxpayers were randomly selected to take the survey
by using a structured method that offered the survey to every
first or third contact during a specified time of day.
o The consulting company that administered the survey told us that
from November 27, 2006, through February 28, 2007, 1,572
individuals agreed to take the survey, and 1,011 of these
individuals completed the survey. A consulting company
representative told us that the company was not aware, until
several months after the survey was first offered, that the PCAs
used differing methodologies for offering the survey and that, as
a result, not all right party contacts were offered an opportunity
to complete the survey.
o Among other related key observations, we were told that it was
IRS policy to not provide the PCAs with taxpayer telephone contact
information. As a result, in attempting to contact taxpayers by
telephone, PCA representatives tried to determine the taxpayers'
phone numbers through electronic searches. According to the PCAs,
their representatives made a total of 252,173 outbound connected
telephone calls from September 2006 through February 2007 in an
attempt to resolve the 37,030 cases IRS referred.^6 Out of these
252,173 calls, PCAs confirmed 13,630 right party contacts.
o The overall satisfaction rating of 94 percent to 96 percent
reported by the consulting company, and quoted by IRS, represents
the answer to 1 question on the 20-question automated survey. Of
the survey questions, 15 related to taxpayer satisfaction; the
other questions were to gather more information about the
respondents themselves. Those respondents who completed the entire
survey had their results counted by the consulting company.
^6According to IRS, for all PCAs, the outbound connected call figure
includes any outbound phone call that connects with a person, with the
exception of calls that are answered but immediately disconnected. For 2
PCAs, outbound connects include reaching an electronic answering device
such as an answering machine. The third PCA's predictive dialer system
does not connect identified answering machine calls to employees. Outbound
connects do not include no answers, operator messages for disconnected
numbers, busy signals, fax machine answers, or calls that do not connect
for any other reason.
Background
As of December 2004, IRS classified approximately $7.7 billion in
delinquent tax debt as potentially available for private debt
collection--$5.5 billion in low-priority work and $2.2 billion
that was not likely to be assigned to IRS employees for
collection. In the American Jobs Creation Act of 2004, Congress
authorized IRS to contract with private sector debt collection
companies to collect federal tax debts. Based on this authority,
IRS awarded contracts in March 2006 to three PCAs for tax
collection services. IRS began referring taxpayer cases to PCAs in
September 2006. Because of legal restrictions, PCAs can only take
certain defined steps to collect tax debts--including locating
taxpayers, requesting full payment of the tax debt or offering
taxpayers installment agreements if full payments cannot be made,
and obtaining financial information from taxpayers. PCAs have
limited authorities and are not allowed to adjust the amount of
tax debts or to use enforcement powers to collect the debts, which
IRS believes are inherently governmental functions to be performed
only by IRS employees. Additionally, PCAs do not actually collect
the debts, but instruct taxpayers to forward payments to IRS. PCAs
are paid on a fee-for-service basis ranging from 21 percent to 24
percent of the debt collected based on the balance of the account
at the time of referral. IRS only referred those cases in which
the taxpayer had not disputed the debt (e.g., taxpayers who filed
form 1040, 1040A, or 1040EZ and owe a balance) and delinquency
exists for one or more tax periods.
Under the IRS policy and procedures guide, PCAs are required,
within 10 calendar days of receiving delinquent account
information from IRS, to send a taxpayer notification letter to an
address provided by IRS. This letter states that the taxpayer's
account has been placed with an IRS contractor for collection.
According to IRS guidance, no sooner than 2 days after the PCA
sends the notification letter, PCA employees may attempt to
contact the taxpayer by telephone. However, to comply with 26
U.S.C. S 6103--which establishes a taxpayer's right to privacy of
tax information--PCA employees must not disclose any tax
information until they are certain the person with whom they are
speaking is the taxpayer. When a PCA employee makes a call to a
taxpayer and reaches an answering machine, the only information
the employee may leave on a recording is his or her name (no
pseudonyms), company name, telephone number, the name of the
taxpayer the PCA is attempting to reach, and the fact that the PCA
is calling about a debt (i.e., rather than specifically a tax
debt).
In August 2006, IRS began working with a consulting company to
develop and administer a taxpayer survey for PCA contacts. On
November 27, 2006, the consulting company began administering the
survey. Under guidance issued by IRS, PCAs were instructed to
invite every right party contact to take the survey. If the
contacts agreed to take the survey, they were transferred to the
automated survey line. For the first 3 months of survey
administration, the consulting company was required to issue
overall satisfaction scores every month, followed by a quarterly
report containing responses to all survey questions with
information subdivided by each PCA.
According to IRS, early in 2007, IRS did not execute the option to
renew one of the PCA contracts. As of the date of this testimony,
only two of the PCAs we reviewed are now under contract with IRS.
PCA Program Data, Survey Data, and Key Related Findings
According to the PCAs, 37,030 tax debt cases were referred by IRS
from September 2006 through February 2007. In addition, we were
informed that the survey was not offered until November 27,
2006--almost 3 full months after PCAs began to contact taxpayers.
PCAs reported a total number of 13,630 right party contacts from
September 2006 through February 2007, with 6,793 of these contacts
made after the survey was available.^7 Because PCAs began calling
taxpayers in September 2006 before the survey was available, about
50 percent of all right party contacts identified during the
period of our review were not eligible to take the survey.
According to the consulting company, the validity of the survey
was based on the key underlying assumption that all right party
contacts would be offered a chance to take the survey. Although
IRS instructed the PCAs to offer the survey to all right party
contacts, we could not obtain information on how many of the 6,793
contacts were offered the survey. One PCA reported that it offered
the survey to 999 right party contacts and made 2,694 right party
contacts during this period. Officials at this PCA told us that
from November 27, 2006, through February 13, 2007, taxpayers were
randomly selected to take the survey using a structured method
that offered the survey to every first or third contact during a
specified time of day. The second PCA told us that it offered the
survey to all right party contacts, but it did not keep any
records to substantiate this claim. The third PCA told us that the
survey was offered to all right party contacts, unless the PCA
representative was aware that the contact was driving, if the
contact had stated that he or she needed to get off the phone, or
the contact said he or she was late for something. This PCA also
did not have records regarding how many right party contacts were
offered the survey, but an official noted that they were
implementing procedures to track this information in the future.
See table 1 for a summary of the PCA approaches to offering the
survey during the period of our review.
^7As indicated previously, right party contacts made from November 27,
2006, through November 30, 2006, are not included in this figure, although
they would have been eligible to take the survey.
Table 1: PCA Approaches to Survey Methodology, November 2006 through
February 2007
Sources: GAO and the PCAs.
Note: Right party contacts offered the survey between November 27, 2006
and November 30, 2006 are not included in the figures above.
aIRS did not execute the option to renew this PCA's contract early in
2007.
Beginning in early April 2007, IRS officials reemphasized the need for
PCAs to offer the survey to all right party contacts and to keep records
in this regard. These instructions have been incorporated in additional
guidance for the PCAs.
The consulting company that administered the survey provided us with
records indicating that of those offered the survey, 1,572 right party
contacts agreed to be transferred to the automated survey system from
November 27, 2006, through February 28, 2007. Of these, records further
indicate that 1,011 individuals completed the survey. A consulting company
representative told us that the company was not aware, until several
months after the survey was first offered, that the PCAs had used
differing methodologies for offering the survey and that not all right
party contacts were offered it. Table 2 provides summary information on
the data we gathered from IRS, the PCAs, and the consulting company.
Table 2: Summary of PCA Work and Consulting Company Survey Work, September
2006 through February 2007
Sources: IRS, the PCAs, and the consulting company.
Note: We did not independently verify the reliability of these data.
aThe survey period we reviewed was from November 27, 2006, through
February 28, 2007. Data do not include right party contacts made between
November 27, 2006 and November 30, 2006.
We also made several related observations during the course of our work:
o PCAs were given some information about taxpayers with delinquent
debt, including the taxpayers' name, Social Security numbers, and
last known addresses per IRS records. According to IRS, it did not
provide PCAs with telephone numbers for the taxpayers as a matter
of policy. As a result, in attempting to contact taxpayers by
telephone, PCA representatives tried to determine the taxpayers'
phone numbers through electronic searches, for example, through
the Lexis-Nexis database. PCAs told us that they made a total of
252,173 outbound connected telephone calls from September 2006
through February 2007 in an attempt to resolve the 37,030 cases
referred by IRS. PCAs indicated that 89,781 calls--or about 36
percent of all connected outbound calls--resulted in messages left
on answering machines, voice mail, or with third parties.
o In an attempt to make contact with the right party, PCAs may
have contacted a substantial number of taxpayers who were not part
of the 37,030 cases referred to PCAs by IRS--these taxpayers
represent a potentially large group of incorrect contacts.
Incorrect contacts were not offered the survey. Examples of
individuals who were not offered the survey would include
individuals who refused to provide personal information to the
PCAs and individuals who provided personal information but were
not authenticated as part of the 37,030 IRS referrals.
o The overall satisfaction rating reported by the consulting
company, and quoted by IRS, represents the answer to 1 question on
a 20-question automated survey. The question was "Everything
considered, whether you agree or disagree with the final outcome,
rate your overall satisfaction with the service you received
during this call." Respondents were allowed to rate their
satisfaction on a scale of one to five--with one being "very
dissatisfied" and five being "very satisfied." Of the survey
questions, 15 related to customer satisfaction; the other
questions were to gather more information about the respondents
themselves. Those respondents who completed the entire survey had
their results counted by the consulting company. Satisfaction
ratings for other survey questions ranged from 81 percent (ease of
understanding letters received from PCAs) to 98 percent (courtesy
of PCA representatives).
o Officials at IRS and the consulting company confirmed that some
right party contacts were offered (and may have taken) the survey
more than once because they had multiple discussions with a PCA
representative. Thus, some of the 1,011 right party contacts who
completed the survey may represent duplicate respondents.
Mr. Chairman, this concludes my statement. I would be pleased to answer
any questions that you or other members of the Committee may have at this
time.
Contacts and Acknowledgments
For further information about this testimony, please contact Gregory D.
Kutz at (202) 512-7455 or [email protected]. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this testimony. Key contributors to this testimony were John Ryan,
Assistant Director; Bruce Causseaux, Jennifer Costello, Heather Hill,
Wilfred Holloway, Jason Kelly, and Andrew McIntosh.
(192249)
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Highlights of [19]GAO-07-890T , a testimony before the Committee on Ways
and Means, House of Representatives
May 23, 2007
TAX DEBT COLLECTION
Measuring Taxpayer Opinions Regarding Private Collection Agencies
Every year the Internal Revenue Service (IRS) does not collect tens of
billions of dollars in delinquent taxes. In 2004, Congress authorized IRS
to use private collection agencies (PCA) to help collect some of these
debts. To ensure that taxpayers are treated properly and that the program
achieves the desired results, IRS contracted with a consulting company to
perform a survey of right party contacts--those individuals who confirmed
their identity and tax debt to PCAs over the telephone. The consulting
company reported overall taxpayer satisfaction ratings from 94 to 96
percent for contacts made from November 2006 through February 2007.
At the request of the Chairman, House Committee on Ways and Means, GAO
attempted to obtain, for the period September 2006 through February 2007,
the number of tax debt cases IRS referred to PCAs, right party contacts
who were offered the taxpayer survey, and right party contacts who took
the survey. GAO was also asked to report any other key observations
related to the PCA program and taxpayer survey.
To perform this work, GAO collected information and interviewed officials
from IRS, the consulting group that administered the survey, and the PCAs.
According to the PCAs, 37,030 tax debt cases were referred to them by IRS
from September 2006 through February 2007. PCAs reported making contact
with, and authenticating the identity of, 13,630 right party contacts. Of
these, 6,793 were eligible to take the taxpayer survey which did not start
until the end of November 2006. According to the consulting company, the
validity of the survey was based on the key underlying assumption that all
right party contacts would be offered a chance to take the survey.
However, GAO could not determine the number of right party contacts
offered the survey because not all PCAs kept records on who was offered
it. Further, as summarized in the following table, the three PCAs used
different methods to determine which right party contacts were offered the
survey.
PCA Approaches to Survey Methodology, December 2006 through February 2007
Sources: GAO and the PCAs.
Note: Right party contacts offered the survey between 11/27/06 and
11/30/06 are not included in the figures above.
The consulting company that administered the survey told GAO that between
November 27, 2006, and February 28, 2007, 1,572 of the individuals offered
the survey, agreed to take the survey, and 1,011 of these individuals
completed the survey. A consulting company representative told GAO that
the company was not aware, until several months after the survey was first
offered, that the PCAs used differing methodologies for offering the
survey and that not all right party contacts were offered an opportunity
to complete the survey. According to IRS, beginning in April 2007, PCAs
began offering the survey to all right party contacts.
Among other key observations, IRS advised GAO that they did not provide
the PCAs with taxpayer telephone contact information for referred cases.
As a result, in attempting to contact taxpayers by telephone, PCA
representatives tried to determine the taxpayers' phone numbers through
electronic searches. PCA representatives told GAO that they made a total
of 252,173 outbound connected telephone calls from September 2006 through
February 2007 in an attempt to make contact with the 37,030 tax debt cases
IRS referred. PCAs did not offer the survey to incorrect contacts, such as
individuals who provided personal information but were not authenticated
as right party contacts.
References
Visible links
10. http://www.gao.gov/cgi-bin/getrpt?GAO-04-492
11. http://www.gao.gov/cgi-bin/getrpt?GAO-06-1065
19. http://www.gao.gov/cgi-bin/getrpt?GAO-07-890T
*** End of document. ***