Senate Republican Policy Committee Releases Paper on Private Tax Collection

The U.S. Senate Republican Policy Committee (RPC) released a paper titled, "Private Collection Agencies: Addressing a Piece of the Tax Pie" on Nov. 15. The Executive Summary is printed below.

This paper can also be found at http://www.rpc.senate.gov, and in the RPC office, 347 Russell Senate Office Building, Washington, D.C.

Executive Summary:

The tax gap is the difference between the taxes that should have been paid on time and the amount actually paid in a specific tax year. The net tax gap, which is computed by subtracting late payments from the overall tax gap, is estimated to be $290 billion.

Discussions about long-term tax reform are essential; however, Congress should not overlook any immediate options that will raise revenues without raising taxes. One option is to use private collection agencies (PCAs) to assist the IRS in its tax collection efforts, a program that Congress authorized in 2004 and which is being implemented by the IRS.

The purpose of the PCA program is twofold: (1) to help reduce the significant and growing number of resolvable but uncollected cases; and (2) to enable the IRS to focus its existing resources more efficiently on the difficult cases.

The concerns raised about the PCA program have all been addressed in the program’s design.

• Critics claim that the PCA program will take jobs from IRS employees, but the program is designed to assist IRS agents, not replace them. The IRS will assign the simpler cases to PCAs, and leave the more complex ones to IRS agents.

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• Concerns related to privacy and collection impropriety are important, which is why the IRS plan gives critical attention to taxpayer protections. PCAs must adhere to numerous safeguards designed to protect taxpayer rights.
• Under no circumstance will PCAs be given cases in which they would need to exercise discretion. The PCA program will focus on taxpayers who either: (1) have filed a return showing a balance due, but have failed to pay it in full; or (2) have been assessed additional tax by the IRS and have made several voluntary payments toward satisfying their obligation, but have not paid in full.

The use of PCAs to assist the government with its debt collection is nothing new: the Department of Education, the Department of Treasury and the Department of Health and Human Services all use PCAs to collect debts owed to the federal government.

The PCA program should be given a chance. The tax debt collection arena is an area begging for improvement, and the use of PCAs is a proactive, immediate step towards increasing the number of closed collection cases.