SEN. GRASSLEY: Those Wanting to Close the Tax Gap Need Look No Further than the Successful IRS Private Debt Collection Program

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News accounts continue to mention plans to increase IRS enforcement funding and to impose onerous reporting requirements on sensitive banking information to the IRS.

 

These proposals raise many concerns, particularly in light of questions regarding the ability of the IRS to protect taxpayer information.

 

However, I want to discuss an existing IRS program that’s already collecting hundreds of millions of dollars in unpaid taxes annually.

 

I am referring to the Private Debt Collection Program that uses private contractors to pursue tax debts that the IRS would otherwise not pursue.

 

This program was enacted as part of infrastructure legislation signed into law in 2015. Each year since then annual updates on the program’s finances document the growing success of the program.

 

As of the end of fiscal year 2020, the program had collected nearly $1 billion in unpaid taxes. After accounting for program costs, it’s returned more than $678 million in net revenue to the Treasury. Of that $678 million, more than $458 million was from fiscal year 2020 alone.

 

Every year the program is allowed to function, it brings in more and more money to the Treasury. At the same time, it generates resources the IRS uses to hire additional tax collection personnel. To date, the program has enabled IRS to hire many new employees.

 

The recent IRS update for the third quarter of fiscal year 2021 continues this trend. Through June, the Private Debt Collection Program has provided more than $700 million in net revenue to the Treasury.

 

In other words, in the first 9 months of fiscal year 2021, the program has more than doubled the revenue it has returned to the Treasury. The longer this program is allowed to work, the more successful it becomes.

 

The proposals being put forward by my colleagues across the aisle are based on the premise that by spending more money the IRS will collect more money. The Private Debt Collection program brings in money without spending more money.

 

Despite the obvious benefits of this program, I’m very concerned that the IRS has suspended providing additional cases to the program until the end September.

 

Commissioner Rettig assured me in responses to written questions that additional cases would be provided on September 27.

 

I am going to hold him to that, and in the upcoming days expect to see him keep his word to me.

 

All the handwringing over spending more money to increase IRS enforcement and information reporting shows the serious issues involved in those proposals.

 

The IRS Private Debt Collection Program is proven to collect taxes already owed, allows the IRS to hire more personnel and costs nothing up front.

 

Anyone serious about closing the tax gap should support and encourage the full use of this program.