New IRS program is helping a segment of taxpayers
resolve their tax debts
According to the latest Comprehensive Taxpayer Attitude Survey (CTAS) conducted by the Internal Revenue Service, (IRS), 95 percent of Americans polled agree that it’s their civic duty to pay their fair share of taxes.
Despite this, the government faces a significant tax gap – more than $400 billion that, if even a small portion of which were collected, could make an enormous difference to our nation’s deficit or fund much needed programs or infrastructure improvements.
People get behind on paying their taxes for a wide variety of reasons – some get overwhelmed by the paperwork, or are too busy to follow-up, others have been sidetracked by a disruption in their life or find themselves facing a temporary financial hardship. Regardless of the reason, everyone is responsible for paying their fair share of taxes and now there’s a program that can help a significant portion of Americans who find themselves with lingering tax debt.
Congress mandated the creation of the IRS Private Debt Collection (PDC) Program to reach out to taxpayers with uncontested tax underpayments and offer a variety of customizable payment plans to make it easier for them to satisfy their tax debt.
Tax underpayments are caused when a taxpayer appropriately files their tax return, but has not yet paid all the taxes they know they owe. Prior to the PDC Program, the IRS did not have the manpower resources to conduct outreach to this segment of taxpayers to discuss their payment options. As a result, there are currently millions of inactive underpayment accounts in arrears worth approximately $131 billion in legitimate federal tax revenue that could be collected.
The IRS selects underpayment tax accounts to be referred into the PDC Program where representatives contact taxpayers by phone to review their tax debt and determine their ability to pay. Taxpayers who opt to participate can choose to pay their tax debt in full or negotiate an installment payment plan based on their particular budget. Taxpayers participating in the PDC Program also have the ability to restructure their payment plan along the way if their circumstances change.
It’s important to note that the PDC Program is purely voluntary. If a taxpayer shares that they cannot pay their tax obligation, even over time through a payment plan, the private collection agency (PCA) removes the taxpayer from the PDC program, refers the account back to the IRS and notifies the taxpayer that their account was returned to the IRS. The goal of the program is to provide options and support to taxpayers who do have the ability to pay their tax obligations.
And, there’s good news. At the end of the first full year, new reports show the PDC Program is working well and successfully bringing in tax revenue for the U.S. Treasury and IRS.
A third-party vendor engaged by the IRS surveyed participating taxpayers to determine their level of satisfaction with the PDC Program. Participants reported a 93 percent satisfaction rate with their experience in the PDC Program.
The PDC Program also has very stringent oversight. In fact, PCA’s are subject to the same rigorous oversight as IRS agents. Calls are monitored by the IRS and the PDC Program is graded on the implementation of taxpayer rights, customer service, statutory and contract requirements. The latest report shows the PDC Program has received A-level scores in customer accuracy, professionalism, timeliness, regulatory accuracy and procedural accuracy.
Another strong sign that the program is working – taxpayers contacted are stepping up, choosing to take advantage of the opportunity to pay their tax debts via the PDC Program. To date, approximately 25,000 taxpayers have entered into customized, voluntary installment agreements and more than 30,000 taxpayers have paid their tax debt in full generating $88.7 million in tax revenue.
The program pays for itself and, as current installment plans continue forward, the IRS is releasing more underpayment accounts into the PDC Program for collection which will cause the tax revenue generated to escalate.
Tax revenue collected in via the PDC Program helps the federal government in two important ways. Approximately 57 percent of the collected funds bolster the U.S. Treasury, while an additional 25 percent of the revenue goes into a special fund to provide the IRS with much needed resources to hire and train additional internal staff. The PDC program is funded by a portion of the recovered revenue. Now, at the end of the first full year, upfront program costs are complete, so expenses will drop to maintenance levels allowing even more revenue to filter into the Treasury.
Ultimately, the IRS Private Debt Collection Program is a great example of a successful public-private partnership that’s providing a win for taxpayers and a win for the federal government. Taxpayers have a new, proactive, manageable and purely voluntary way to resolve their tax debt and the federal government increases its financial stability. The overall result is a fair federal tax system.
The Partnership for Tax Compliance