a

GAO

United States General Accounting Office

Report to Congressional Committees

May 2004 TAX DEBT 

COLLECTION

IRS Is Addressing 

Critical Success 

Factors for 

Contracting Out but 

Will Need to Study the 

Best Use of Resources 

GAO-04-492
www.gao.gov/cgi-bin/getrpt?GAO-04-492.

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and methodology, click on the link above. 

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Highlights of GAO-04-492, a report to 

congressional committees 

May 2004

TAX DEBT COLLECTION 

IRS Is Addressing Critical Success 

Factors for Contracting Out but Will Need 

to Study the Best Use of Resources 

Based on our analysis of information from various parties, including officials 

from selected state revenue departments and federal agencies that use PCAs,

five factors are critical to the success of a PCA collection program. Together, 

these factors increase the chances for success and, as illustrated below, help 

the program achieve desired results. 

Although incomplete, IRS has taken actions to address these factors. For 

example, IRS has been developing (1) program performance measures and 

goals, (2) plans for a computer system to transmit data to PCAs, (3) a 

method to select cases for PCAs, and (4) contract provisions to govern data 

security and PCAs’ interactions with taxpayers. IRS officials recognize that 

major development work remains and have plans to finish it. Officials said 

they would suspend work if PCA authorizing legislation is not passed during 

2004. If legislation passes, officials estimated that it would take 18 to 24 

months to send the first cases to PCAs. 

 

Aware of concerns about the efficiency of using PCAs, IRS intends to study 

the relative performance of PCAs and IRS employees in collecting tax debts 

after gaining some experience with them. However, the initial idea for a 

study would provide limited information to judge whether or when the PCA 

approach is the best use of resources. The tentative idea—comparing PCA 

and IRS performance for the same type of simpler cases to be sent to 

PCAs—does not recognize that IRS officials believe that using IRS 

employees on such cases would not be the best use of staff. Federal 

guidance emphasizes efficiently and effectively using resources to achieve 

results and identifying the most realistic and cost-effective program option. 

Experience gained in using PCAs and a new IRS case selection process 

would help officials design such a study. 

Critical Success Factors Help Achieve Desired Results 

Congress is considering legislation 

to authorize IRS to contract with 

private collection agencies (PCA) 

and to pay them out of the tax 

revenue that they collect. Some 

have expressed concerns that this 

proposal might be unsuccessful, 

inefficient, or result in taxpayers 

being mistreated or having their 

private tax information 

compromised. 

This report discusses (1) the 

critical success factors for 

contracting with PCAs for tax debt 

collection; (2) IRS’s actions to 

address these factors in developing 

the PCA program and actions left 

to be done; and (3) whether IRS, if 

it receives the authority to use 

PCAs, plans to do a study that will 

help policy makers judge whether 

PCAs are the best use of funds to 

meet IRS’s collection objectives. 

If Congress authorizes the use of 

PCAs, as soon as practical after 

experience is gained using PCAs, 

the IRS Commissioner should 

ensure that a study is completed 

that compares the use of PCAs to a 

collection strategy that officials 

determine to be the most effective 

and efficient overall way of 

achieving collection goals. 

In commenting on a report draft, 

IRS said it would plan a study to 

ensure that IRS is making the most 

effective and cost efficient use of 

total resources available.
Page i GAO-04-492 Tax Debt Collection

Contents

Letter 1

Results in Brief 2

Background 4

Objectives, Scope, and Methodology 7

Five Factors Are Critical for a Successful PCA Collection 

Program 9

IRS Has Taken Steps to Address Aspects of the Critical Success 

Factors but Has Much Work Remaining 12

Potential Study Design Would Provide Limited Information to Judge 

Whether Contracting with PCAs Is the Best Use of Resources 14

Conclusions 19

Recommendation 20

Agency Comments and Our Evaluation 20

Appendixes

Appendix I: Trends in IRS Collections Programs, 1996-2003 23

Appendix II: Actions IRS Has Taken to Address Critical Success 

Factors 25

Appendix III: Comments from the Internal Revenue Service 28

Appendix IV: GAO Contacts and Staff Acknowledgments 30

GAO Contacts 30

Acknowledgments 30

Tables Table 1: Critical Success Factors and Related Subfactors for 

Contracting with PCAs for Tax Debt Collection 11

Table 2: Examples of Key Actions IRS Has Taken to Address 

Critical Success Factors and Examples of Major Tasks 

Remaining 12

Figures Figure 1: Five Critical Success Factors Help Achieve Desired 

Results 10

Figure 2: Annual Gap Between Collection Cases Assigned and 

Cases Closed as a Percentage of Cases Assigned, Fiscal 

Years 1996 through 2003 23

Figure 3: Number of Revenue Officers Working on Delinquent 

Accounts, 1996 through 2003 24
Contents

Page ii GAO-04-492 Tax Debt Collection

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Page 1 GAO-04-492 Tax Debt Collection

United States General Accounting Office

Washington, D.C. 20548

A

May 24, 2004 Letr

Congressional Committees 

For the last several years, Congress, the Internal Revenue Service (IRS), 

and others have been concerned that performance declines in IRS’s 

programs to collect known unpaid taxes due the government1

 might be 

affecting taxpayers’ confidence in the fairness of our tax system and 

voluntary compliance. In testimonies and reports, we have highlighted 

such declines in the collection programs, including a growing gap between 

the number of cases assigned for collection action and the number of cases 

closed each year. Also, the amount of potentially collectable known tax 

debt has grown. As of September 30, 2003, IRS had an inventory of unpaid 

taxes with some collection potential—including interest and penalties—of 

$120 billion,2

 up from $112 billion the previous year. According to IRS, the 

backlog of outstanding tax debt continues to grow 3 to 4 percent each year. 

Because of potential revenue losses and the threat to voluntary 

compliance, we have designated collection of unpaid taxes as a high-risk 

area for the federal government.3

 

To help address the growing tax debt inventory, the Department of the 

Treasury has proposed that Congress pass legislation to authorize IRS to 

use private collection agencies (PCA) to help collect tax debts for simpler 

types of cases, paying them out of a revolving fund of tax revenues that 

they collect. IRS officials said that this proposal arose, in part, because of 

the belief that Congress was not likely to provide the increased budget to 

hire enough IRS staff to work on the inventory of collection cases. 

Although the proposal has received support, some have expressed 

concerns that it might be unsuccessful, inefficient, or result in taxpayers 

being mistreated or having private tax information compromised. In 

addition, some in Congress and elsewhere in the tax community have said 

that increasing IRS collection staff—instead of contracting out tax

1

 Known unpaid taxes due the government include delinquent taxes (as well as penalties and 

interest) owed that IRS has attempted to collect but has decided not to continue pursuing. 

2

 U.S. General Accounting Office, Financial Audit: IRS’s Fiscal Years 2003 and 2002 

Financial Statements, GAO-04-216 (Washington, D.C.: Nov. 13, 2003). 

3

 U.S. General Accounting Office, Major Management Challenges and Program Risks: 

Department of the Treasury, GAO-03-109 (Washington, D.C.: January 2003). The collection 

of unpaid taxes high-risk area also encompasses the amount of unpaid taxes that are due the 

government but that IRS has not identified.
Page 2 GAO-04-492 Tax Debt Collection

collection—could result in tax debts being collected at less cost. A 1996 

IRS pilot test to contract with PCAs was discontinued, in part, because the 

revenue collected was less than IRS’s direct costs plus revenues lost from 

using IRS employees to support PCAs rather than to collect taxes. Our 

review of the pilot found that, among other limitations, IRS’s computer 

systems and inability to transfer data hampered efforts to send appropriate 

cases to PCAs.4

 

Due to congressional interest in the legislation being considered to 

authorize IRS contracts with PCAs to collect simpler tax debts, we 

reviewed, as part of our basic legislative responsibility for reviewing 

federal programs and activities, various issues related to IRS’s preparations 

to implement the proposal, if enacted, and to report on the role of PCAs in 

IRS’s overall collections strategy. Specifically, our objectives were to (1) 

identify the critical success factors for contracting with PCAs for tax debt 

collection; (2) determine whether IRS has addressed the critical success 

factors in developing the proposed PCA contracting program and, if not, 

what is left to be done; and (3) determine whether, if IRS receives authority 

to use PCAs, it will do a study that will enable policymakers to judge 

whether contracting with PCAs is the best use of limited federal funds to 

achieve IRS’s collection objectives.

To identify the critical success factors, we interviewed officials from 

selected state revenue departments and federal agencies that use PCAs and 

PCA contractors for government debt collection. We reviewed related 

documentation from these sources. In addition, we analyzed our reports 

on contracting practices. For our other objectives, we gathered and 

analyzed PCA program development documents and interviewed IRS 

officials responsible for developing the PCA program. We conducted our 

work between June 2003 and March 2004 in accordance with generally 

accepted government auditing standards. Our scope and methodology are 

discussed in detail beginning on page 7. 

Results in Brief Five broad factors are critical to the success of a program for contracting 

with PCAs to collect tax debt. Although addressing these factors does not 

guarantee success, together they can improve the chances. First, the PCA 

program should have a results orientation, including established PCA 

4 U.S. General Accounting Office, Internal Revenue Service: Issues Affecting IRS’s Private 

Debt Collection Pilot, GAO/GGD-97-12R (Washington, D.C: July 18, 1997).
Page 3 GAO-04-492 Tax Debt Collection

program goals and performance measures, such as for the amounts of tax 

debt collected. Second, agency resources needed to help achieve desired 

program results should be obtained and deployed, such as computer 

systems to exchange data and staff to work on cases that PCAs refer back 

to IRS. Third, PCAs’ workload should be carefully considered, such as 

selecting the type and volume of cases on which PCAs work. Fourth, 

taxpayer issues should be addressed, such as protecting taxpayer data 

shared with PCAs and ensuring that PCAs treat taxpayers properly. Fifth, 

the agency should do evaluations, including ongoing monitoring of PCAs, 

program results, and costs compared to program goals.

IRS has taken a number of steps to address each of the critical success 

factors. For example, IRS has (1) developed program performance goals 

and measures, (2) been planning development of a computer system to 

send cases and case data to PCAs, (3) been developing a method to select 

PCA cases based on collection potential, and (4) drafted contract 

provisions to govern the security of taxpayer data and PCA interactions 

with taxpayers. As for the evaluation factor, IRS officials have been 

developing approaches for monitoring and measuring contractor 

performance, and said that they intend to start developing an evaluation of 

whether the PCA program achieves its goals after they receive legislative 

authority. The officials recognize that major work needs to be done to 

sufficiently address each factor and have a project plan to finish work on 

the factors. In January 2004, Congress approved the IRS fiscal year 2004 

budget, which would provide the funding to further develop the PCA 

program, but IRS delayed spending the funds until passage of the 

legislation appears to be more imminent. IRS officials said that if 

authorizing legislation did not pass during 2004, IRS would suspend work 

on developing the program. IRS officials estimated that it would take 18 to 

24 months after the authorizing legislation passes to finish the remaining 

work and send cases to PCAs. 

Aware of concerns about the efficiency and effectiveness of using PCAs, 

IRS officials also said that they intend to study the relative performance of 

PCAs and IRS employees in collecting delinquent taxes. However, the 

tentative study approach being considered would provide policymakers 

limited information to judge whether or when the PCA strategy is the best 

use of resources. This tentative approach—comparing PCA and IRS 

performance for the same type of simpler cases that would be sent to 

PCAs—does not recognize that IRS officials believe that using employees 

on simpler cases would not be the best use of these employees given the 

need to work on other, higher priority cases. Various guidance on federal 
Page 4 GAO-04-492 Tax Debt Collection

programs emphasizes that managers are to ensure that resources are used 

efficiently and effectively to achieve intended results, to consider benefits 

and costs in deciding on program options, and to determine which program 

option is the most realistic and cost effective.

If Congress authorizes IRS to use PCAs, we are recommending that the 

Commissioner of IRS ensure that, after experience is gained using PCAs to 

collect tax debt, a study be conducted that compares the use of PCAs to 

another collection strategy, which might include hiring more IRS 

employees, that officials determine to be the most efficient and effective 

overall way of achieving collection goals. 

In providing written comments on this report (see app. III), the 

Commissioner of Internal Revenue agreed that IRS would need to analyze 

the PCA program to determine its effectiveness and impact on the overall 

collection of delinquent taxes. He said that IRS’s plans for evaluating the 

use of PCAs will include a study to ensure that IRS is making the most 

effective and cost efficient use of total resources available. 

Background IRS has two major programs to collect tax debts: telephone collection and 

field collection. If taxpayers become delinquent (that is, do not pay their 

taxes after being notified of amounts owed), IRS staff assigned to the 

telephone collection program may attempt collection over the phone or in 

writing. According to IRS officials, IRS collection staff who make phone 

calls have not been initiating many calls to ask taxpayers to pay their tax 

debts but rather have been responding to phone calls from taxpayers about 

mailed tax due notices. If more in-depth collection action or analyses of 

the taxpayer’s ability to pay tax debt is required, telephone collection staff 

may refer the case to field collections, where staff may visit delinquent 

taxpayers at their homes or businesses as well as contact them by 

telephone and mail. Under certain circumstances, the telephone or field 

staff are authorized to initiate enforced collection action, such as recording 

liens on taxpayer property and sending notices to levy taxpayer wages, 

bank accounts, and other financial assets held by third parties. Field staff 

also can be authorized to seize other assets owned by the taxpayer to 

satisfy the tax debt.
Page 5 GAO-04-492 Tax Debt Collection

As we have previously reported, in recent years IRS has deferred collection 

action on billions of dollars of delinquent tax debt and IRS collection 

program performance indicators have declined. By the end of fiscal year 

2003, IRS’s inventory of tax debt with some collection potential was $120 

billion (up from $112 billion in the previous year). As we reported in May 

2002, from fiscal years 1996 through 2001, IRS had almost universal 

declines in collection performance, including declines in coverage of 

workload, cases closed, direct staff time used, productivity, and dollars of 

unpaid taxes collected.5

 Although IRS’s collection workload declined, the 

collection cases closed declined more rapidly, increasing the gap between 

the number of cases assigned for collection action and the number of cases 

closed each year (see fig. 2 in app. I). As a result, in March 1999, IRS 

started deferring collection action6

 on billions of dollars in delinquencies. 

By the end of fiscal year 2002, IRS had deferred collection action on about 

$15 billion, and, as of May 2003, was deferring action on about one of every 

three collection cases. 

Furthermore, IRS’s collection staffing has declined overall comparing 1996 

to 2003 (see fig. 3 in app. I) despite IRS’s efforts to increase collection 

staffing in its budget requests since 2001. As we previously reported,7

 IRS 

officials have said that collection staffing declines and delays in hiring have 

been caused by increased workload in other essential operations (such as 

as processing returns, issuing refunds, and answering taxpayer mail), other 

priorities (such as taxpayer service), and unbudgeted cost increases (such 

as rent and pay increases). 

According to statements by the previous and current IRS commissioners, 

IRS’s growing workload has outpaced its resources. The former IRS 

Commissioner’s report to the IRS Oversight Board during September 2002 

made a case for additional staff to check tax compliance and collect taxes 

5

 U.S. General Accounting Office, Tax Administration: Impact of Compliance and 

Collection Program Declines on Taxpayers, GAO-02-674 (Washington, D.C.: May 22, 2002).

6

 In 1999, IRS’s collection case selection system began forwarding cases for collection only if 

they met certain dollar threshold, age, and case characteristics. Those not forwarded were 

“deferred.” 

7

 See U.S. General Accounting Office, Compliance and Collection: Challenges for IRS in 

Reversing Trends and Implementing New Initiatives, GAO-03-732T (Washington, D.C.: 

May 7, 2003); and Internal Revenue Service: Assessment of Fiscal Year 2005 Budget 

Request and 2004 Filing Season Performance, GAO-04-560T (Washington, D.C.: Mar. 30, 

2004).
Page 6 GAO-04-492 Tax Debt Collection

owed. The Commissioner recognized that IRS needed to improve the 

productive use of its current resources, but also cited a need for an annual 

2 percent staffing increase over 5 years to help reverse the trends. 

According to the Commissioner, IRS would require 5,450 new full-time 

collection staff. IRS officials said that the PCA program proposal was 

undertaken because it is unlikely that IRS will receive funding adequate to 

handle the growing collection workload.

Since current law requires IRS to collect tax debts, legislation has been 

proposed8

 to authorize IRS to use PCAs to collect simpler tax debts under 

defined activities—including locating taxpayers, requesting full payment of 

the tax debt or offering taxpayers an installment agreement if full payment 

cannot be made, and obtaining financial information from taxpayers. 

Given the limited authorities proposed for PCAs,9

 IRS would refer those 

cases that are simplest to collect and have no need for IRS enforcement 

action, including cases in which (1) taxpayers filed a tax return showing 

taxes due but that have not been paid and (2) taxpayers made three or 

more voluntary payments to satisfy an additional tax assessed by IRS but 

have stopped the payments. 

In 1996, Congress directed IRS to test the use of PCAs, earmarking $13 

million for that purpose. IRS canceled the pilot project in 1997, in part, 

because it resulted in significantly lower amounts of collections and 

contacted significantly fewer taxpayers than expected (about 14,000 of 

153,000 taxpayers). IRS reported that through January 1997, this program 

accounted for about $3.1 million in collections and about $4.1 million in 

expenses ($3.1 million in design, start-up, administrative expenses, and 

about $1 million in PCA payments). IRS also reported lost opportunity 

costs of about $17 million because IRS collection staff shifted from 

collecting taxes to helping with the pilot. 

The current proposal to use PCAs has some significant differences from the 

1996 pilot test of PCAs. First, PCAs in the current proposal will actually try 

to resolve collection cases within certain guidelines. In the 1996 test, PCAs 

only contacted taxpayers to remind them of their outstanding tax debt and 

suggest payment options. Second, PCAs under the current proposal will be 

8

 See, e.g., S. 1637, 108th Cong. § 487 (2003) and H.R. 3967, 108th Cong. § 521 (2004). 

9

 According to IRS officials, decisions such as the adjustment of the amount of tax debts and 

the use of enforcement powers to collect the debts are inherently governmental functions 

that are to be made by government employees rather than PCA employees.
Page 7 GAO-04-492 Tax Debt Collection

paid a percentage of dollars they help collect from a revolving fund of all 

PCA collections. In the 1996 test, PCAs were paid a fixed fee for such 

actions as successfully locating and contacting taxpayers, even if payments 

were not received. Third, IRS will electronically transmit cases and data 

about the taxpayer and taxes owed to PCAs. In 1996, IRS’s computers were 

not set up to electronically transmit the cases and data to PCAs. For the 

current proposal, IRS intends to develop the capability to make secure 

transmissions to PCAs and protect confidentiality.

Objectives, Scope, and 

Methodology

To identify the critical success factors for contracting with PCAs for tax 

debt collection, we used multiple sources. We reviewed three of our 

reports on leading practices in contracting10 and interviewed our staff that 

review government contracting. We also interviewed parties with 

experience in contracting for government debt collection, including both 

tax and non-tax debt, to identify any factors common to both debt types. 

Specifically, we interviewed officials from

• 11 state revenue departments that, according to officials from the 

Federation of Tax Administrators (FTA),11 represented a mix—in 

aspects such as amount of resources and PCA roles—of experience in 

contracting with PCAs for tax debt collection and provided examples of 

program practices in such areas as case selection and use of 

performance data;12

• the Department of the Treasury’s Financial Management Service and 

Department of Education—two federal agencies with large-scale, nontax debt collection contracting; and

10 U.S. General Accounting Office, Information Technology: Leading Commercial Practices 

for Outsourcing of Services, GAO-02-214 (Washington, D.C.: Nov. 30, 2001); Contract 

Management: Guidance Needed for Using Performance-Based Service Contracting, GAO02-1049 (Sep. 30, 2002); and Contract Management: Commercial Use of Share-in-Savings 

Contracting, GAO-03-327 (Jan. 31, 2003).

11 FTA is an organization whose membership includes the principal tax collection agencies 

of the 50 states, the District of Columbia, and New York City. According to its charter, FTA’s 

mission is to improve the quality of state tax administration by providing services to state 

tax authorities and administrators.

12 According to IRS data, about 40 state revenue departments and the District of Columbia 

have used PCAs for the collection of delinquent taxes. 
Page 8 GAO-04-492 Tax Debt Collection

• the three PCA firms that IRS selected as subject matter experts to assist 

in drafting the provisions of a contract for PCA collection services. 

To help corroborate the factors that others identified, we interviewed 

officials from the IRS office that is developing the proposed PCA program, 

the IRS Office of Taxpayer Advocate, and the National Treasury Employees 

Union, which represents IRS employees. 

To summarize and categorize the critical success factors identified, we 

grouped together similar factors that were most frequently cited by the 

officials with experience in government debt collection contracting. We 

first grouped factors associated with the start of a program and with a 

maturing program into two broad time-oriented factors, including topics 

we identified as implicit in the interviews and documents cited above. 

Between these two time-oriented factors, we categorized three other 

factors according to the broad topics that were most frequently cited. To 

validate our summarization and categorization, we asked for comments on 

our draft list of critical success factors from those who we had consulted to 

identify the factors as well as from officials at four additional PCA firms 

that, according to interviewed officials from two state revenue 

departments and the two federal agencies, had experience in government 

debt collection. In commenting on the draft list of factors, some officials 

stressed certain factors more than others or elaborated on selected factors 

or subfactors, but generally did not suggest factors beyond those 

encompassed in our draft list. We made changes based on their comments 

where appropriate. 

To determine whether IRS has addressed the critical success factors in 

developing the PCA contracting program and, if not, what is left to be done, 

we interviewed IRS program officials. We analyzed program documents, 

including the draft PCA contract as outlined in IRS’s Request for Quotes 

(RFQ)13 and the Office of Management and Budget (OMB) Form E-30014

budgetary document that describes goals and plans for the program. We 

did not attempt to analyze how well or to what extent IRS addressed the 

factors, or whether IRS made the right decisions on issues such as the 

program goals or measures.

13 An RFQ is a solicitation to identify contractors willing to meet the statement of work to be 

done.

14 OMB Form E-300, Capital Asset Plan and Business Case, 2003.
Page 9 GAO-04-492 Tax Debt Collection

To determine whether, if IRS receives authority to use PCAs, it will do a 

study that will enable policymakers to judge whether contracting with 

PCAs is the best use of federal funds to achieve IRS’s collection objectives, 

we interviewed IRS program officials. We reviewed any studies IRS had 

done to compare the use of PCAs with other strategies and assessed IRS’s 

intended approach for any future studies. We also applied our knowledge 

of how to study the cost-effectiveness of options to meet a desired result or 

benefit. 

We did our work from June 2003 through March 2004 in accordance with 

generally accepted government auditing standards.

Five Factors Are 

Critical for a 

Successful PCA 

Collection Program

Our work identified and validated five broad factors that are critical to the 

success of a proposed program for contracting with PCAs to collect tax 

debt. A general description of each critical success factor follows:

• Results orientation involves establishing expectations, measures, and 

desired results for the program. 

• Agency resources involve obtaining and deploying various resources. 

• Workload involves ensuring that the appropriate cases and case 

information are provided to PCAs.

• Taxpayer issues involve ensuring that taxpayer privacy and other rights 

are protected. 

• Evaluation involves monitoring performance and collecting data to 

assess the performance of PCAs and the overall program.15 

As figure 1 illustrates, the factors are considered “success” factors because 

each one, if adequately addressed, can help ensure that the PCA program 

achieves desired results, such as in collecting tax debts. Although 

addressing all factors during program design and implementation does not 

guarantee success, doing so could improve the chances. 

15 The purpose of program performance evaluation is to help assess how well the program is 

achieving its goals, rather than whether another program option would be a better use of 

agency resources to achieve those goals.
Page 10 GAO-04-492 Tax Debt Collection

Figure 1: Five Critical Success Factors Help Achieve Desired Results 

Table 1 further describes the critical success factors by showing their 

related subfactors that we identified and validated. 

Help ensure that 

a PCA program 

achieves desired 

results

Results orientation

Agency resources

Workload

Taxpayer issues

Evaluation

Source: GAO.
Page 11 GAO-04-492 Tax Debt Collection

Table 1: Critical Success Factors and Related Subfactors for Contracting with PCAs 

for Tax Debt Collection 

Source: GAO analysis of selected GAO reports and interviews with officials from selected state and federal agencies and PCA firms.

Critical 

success factor Related subfactors 

Results 

orientation

• Determine expected program goals, costs, and overall results for 

contracting with PCAs.

• Establish contract provisions and operational expectations, 

measurable PCA performance evaluation standards, and PCA 

rewards and disincentives based on performance and ensure that the 

government agency and PCAs have a common understanding of 

these elements.

• Give PCAs as much freedom as practical on how to achieve 

performance goals.

• Use a contracting process that will help ensure that PCAs selected 

are able to meet operational and performance expectations.

Agency 

resources

• Provide sufficient staffs to do work associated with contracting with 

PCAs, including administrative functions, contract oversight, and 

working collection cases referred back by the PCAs.

• Have management commitment to using PCAs.

• Ensure that PCA employees receive appropriate training on such 

areas as taxes and case handling procedures.

• Ensure that computer systems will allow data to be exchanged 

electronically between PCAs and the government agency and that 

payments will be tracked and accounts updated.

• Be aware of and control costs of functions related to contracting.

Workload • Select the appropriate type and volume of cases for PCAs to work on.

• Ensure that contractors work on the range of cases that they are 

assigned in terms of ease of collection and amounts due.

• Provide PCAs appropriate, accurate information on taxpayers and 

accounts.

Taxpayer issues • Ensure that taxpayers are treated properly by PCAs.

• Ensure the security of taxpayer information provided to PCAs.

Evaluation • Perform ongoing monitoring of PCAs in various aspects of operations 

and performance expectations.

• Measure PCAs’ performance in light of performance standards and 

distribute rewards/disincentives.

• Evaluate whether the program meets its goals and expectations and 

adjust the program as needed.
Page 12 GAO-04-492 Tax Debt Collection

IRS Has Taken Steps to 

Address Aspects of the 

Critical Success 

Factors but Has Much 

Work Remaining 

IRS has taken steps to address the critical success factors and developed a 

project plan to help finish addressing the factors if Congress authorizes use 

of PCAs. Officials recognize that much work needs to be done to 

sufficiently address each factor, which they estimate will take 18 to 24 

months after any legislation passes. Table 2 shows examples of the key 

actions taken to address the critical success factors and major tasks 

remaining. Discussion after table 2 elaborates on some of these major 

tasks. 

Table 2: Examples of Key Actions IRS Has Taken to Address Critical Success Factors and Examples of Major Tasks Remaining

Source: Interviews with IRS officials and reviews of IRS documents.

Critical success 

factor Examples of key actions taken Examples of major tasks remaining

Results 

orientation

• Developed performance measures and goals, spelling out 

desired results for PCAs.

• Adopted a performance-based PCA compensation 

strategy, using incentives and disincentives.

• Provided PCAs freedom to determine how to collect tax 

debts, but imposed certain restrictions (e.g., taxpayer 

rights, privacy).

• Decided to use the list of approved federal contractors 

maintained by the U.S. General Services Administration.

• Finalize the goals, measures, and compensation 

system in the contract to be put out for bids.

Agency resources • Identified an infrastructure to administer contracts, provide 

oversight, and work on cases referred back to IRS.

• Identified initial staff needs.

• Received IRS management commitment to support the 

PCA program if legislative authority is granted.

• Complete the administration infrastructure.

• Verify that initial staffing is appropriate.

• Illustrate management commitment by providing 

resources.

• Develop a program to track resources and costs 

associated with the PCA program.

Workload • Started to develop a risk-scoring model to identify the most 

appropriate cases to be referred to PCAs.

• Established incentives to encourage PCAs to work on the 

full range of simpler cases assigned to them. 

• Started planning development of a computer interface 

system to ensure that PCAs receive accurate data on 

taxpayer accounts.

• Finish and test the case selection model.

• Use the model to annually determine the type and 

number of cases to be referred to PCAs.

• Finish and test the computer interface system.

• Train IRS staff on working with PCAs on case 

selections/referrals and data transfers.

Taxpayer issues • Established draft contract provisions on how 

• PCAs must treat taxpayers and protect data, 

• PCAs must follow federal laws, and

• IRS will check PCA compliance in these areas. 

• Develop training courses and train PCA employees 

on taxpayer issues.

• Develop and finalize plans to monitor calls to 

taxpayers and survey their satisfaction with PCAs.

Evaluation • Established draft contract provisions on monitoring and 

evaluating PCA and program performance against 

program goals, performance measures, and the 

performance-based compensation system.

• Develop programs for monitoring PCA performance 

and evaluating program performance against the 

goals.

• Train IRS staff on how to do the evaluations and 

monitoring.

• Use the results to manage the PCA program.
Page 13 GAO-04-492 Tax Debt Collection

IRS officials are aware of these major tasks that must be completed to 

address the critical success factors and implement the PCA program. In 

discussing their intent to address them, IRS officials elaborated on some of 

the major tasks. 

• Under “results orientation,” IRS is aware that it has to clarify a goal on 

how much it expects to collect. IRS had estimated originally that the 

PCA program would result in $9 billion in tax collections and produce 

$7.2 billion in net revenue over 10 years. The Department of the 

Treasury estimated that $1.5 billion in net revenue would be produced 

over 10 years. IRS officials said the differences arise because each 

estimate was done differently. IRS acknowledged that its original 

estimate may be too high and is reworking it in light of the Treasury 

estimate. 

• Under “workload,” IRS officials said that they are aware of the 

importance of selecting the right cases to send to PCAs for collection 

and plan to use consumer credit history data on delinquent taxpayers to 

identify those that would be more likely to pay if contacted. IRS 

officials said that the new case collection system will extend beyond 

selecting cases for PCAs, and that the experience and knowledge IRS 

will gain would contribute to IRS’s broader modernization program for 

using data to improve how IRS does collection work. For example, IRS 

officials said that, in the future, the case selection data might be used to 

help determine which collection method—such as sending notices, 

using PCAs, or making in-person contact—might be more effective in 

attempting collection from a given taxpayer. 

• Under “evaluation,” IRS officials said that they were aware that they had 

not developed plans or dates for evaluating the program to assess how 

well the PCA program achieves its results. IRS officials said that 

developing the evaluation was premature given the other work needed 

to develop the program and lack of legislative authority. IRS officials 

said they intend to start developing the evaluation plan after they 

receive this authority and to finish it before sending cases to PCAs. 

Evaluation plans developed before program implementation increase 

the likelihood that the necessary data and resources for proper 

evaluation will be available when needed. 

• Many of the factors involve the development of an information system. 

Testing of information systems being developed for the PCA program is 

an important task left to do. Our interviews with IRS officials and our 
Page 14 GAO-04-492 Tax Debt Collection

reviews of IRS documents indicate that IRS plans on testing the 

information systems to be used in the PCA program.

IRS officials informed us that they have slowed development of the 

program due to funding constraints and uncertainty over whether and 

when legislation will pass to authorize contracts with PCAs. Because IRS’s 

fiscal year 2004 budget was not passed until January 2004, IRS officials said 

that, since September 2003, IRS slowed work on the PCA program. These 

officials said that, because of various budgetary procedures, the 

appropriated funds were not released to the PCA program until March 

2004. However, the officials explained that IRS, intending to be fiscally 

prudent, is delaying spending of the funds until passage of the legislation 

appears to be more imminent.

IRS officials stated that if legislation to authorize the program was not 

passed during 2004, IRS eventually would suspend work on developing the 

program. These officials said that they have been balancing and managing 

their existing funds and the timing of their work given that the authorizing 

legislation might not pass. If this legislation passes, IRS officials said that 

they would need another 18 to 24 months afterwards to complete the many 

tasks remaining, as shown in table 2. IRS officials said that, if Congress 

passes authorizing legislation in summer 2004, the estimated date for 

starting to send cases to PCAs is July 2006. 

Potential Study Design 

Would Provide Limited 

Information to Judge 

Whether Contracting 

with PCAs Is the Best 

Use of Resources

Although IRS officials intend to study the relative performance of PCAs and 

IRS employees in collecting delinquent taxes, the study approach under 

initial consideration would provide policymakers limited information to 

judge whether and when the PCA strategy is the best use of resources. The 

tentative idea for a design—comparing PCA and IRS performance for 

similar types of simple cases that would be sent to PCAs—does not 

recognize that IRS officials believe that using employees on these cases 

would not be their best use given the need to work on other, higher priority 

cases. 
Page 15 GAO-04-492 Tax Debt Collection

The Cost-Effectiveness of 

the Proposed Use of PCAs 

Has Been Questioned

Among other issues concerning the proposed use of PCAs, policymakers 

and others have questioned whether using PCAs to collect tax debts is 

more efficient or effective than having IRS employees do so. During 

consideration of IRS’s proposal, some members of Congress questioned 

whether IRS could collect the taxes that IRS plans to assign to PCAs at less 

cost or whether IRS would be able to collect a higher portion of the taxes 

that are due. During hearings, some witnesses raised similar concerns.16 

IRS officials have said that IRS employees might be more effective than 

PCAs in collecting delinquent taxes because IRS employees have greater 

powers to enforce collections. These powers (such as tax liens and wage 

levies) may enable IRS employees to collect a higher portion of the taxes 

from the same types of cases on which PCAs would work. 

IRS officials said that the proposal to use PCAs to collect simpler tax debts 

was not based on a judgment that PCAs would necessarily be more 

efficient or effective in collecting delinquent tax debt. Rather the proposal 

was based on a judgment that Congress was unlikely to approve a 

substantial increase in IRS’s budget to fund additional staff for the 

collection function. Officials believed that the growing inventory of tax 

debts was not a good signal to taxpayers about the importance of 

complying with their tax obligations. Given constraints in hiring staff, IRS 

officials said that using PCAs was the only practical means available to 

begin working on significantly more collection cases that otherwise would 

not be worked on due to IRS staffing constraints.

16 For example, see Subcommittee on Oversight, Committee on Ways and Means, U.S. House 

of Representatives, Hearing on Use of Private Collection Agencies to Improve IRS Debt 

Collection (Washington, D.C.: May 13, 2003), 

http://waysandmeans.house.gov/hearings.asp?formmode=view&id=1043 (downloaded Apr. 

6, 2004).
Page 16 GAO-04-492 Tax Debt Collection

Although this policy judgment served as the rationale behind the PCA 

proposal, in March 2004, IRS provided us with projections of revenues and 

federal government costs for the proposed PCA program compared to 

projections for an alternative approach under which IRS would hire 

additional staff to work on the same volume for selected types of cases on 

which the PCAs would work.17 According to the analysis, PCAs would 

generate $4.6 in revenue for every dollar in cost and IRS employees would 

generate $4.1. 

We did not review the data and assumptions that underlie these revenue 

and cost projections because the comparison that IRS constructed did not 

address the relevant economic question for policymakers seeking to reduce 

the backlog of uncollected taxes—which is, what is the least costly 

approach for reaching a certain revenue collection goal. IRS’s analysis did 

not examine other feasible approaches that IRS might be able to use, if 

given additional resources, to collect the same amount of revenue that the 

PCAs would bring in, but at lower cost. 

Study Approach Being 

Considered 

Assuming IRS receives authority to use PCAs, IRS officials said they would 

design a study to compare the performance of PCAs versus IRS employees. 

However, the study approach under initial consideration would provide 

policy makers limited information to help determine whether the use of 

PCAs as currently proposed is the best use of federal resources to collect 

tax debts. IRS’s approach might show whether PCAs or IRS employees are 

best at working on certain types of collection cases, but would not show 

whether the use of PCAs as planned would be the best use of resources to 

deal with the overall collection workload.

IRS officials said that although they believe they should conduct a study 

that compares PCA results to results achieved by IRS employees, they have 

not designed such a study.18 They expect to design the study after 

authorization to use PCAs is enacted and before sending cases to PCAs. 

17 The types of cases PCAs would work on include cases in which (1) taxpayers filed a tax 

return showing taxes due but that have not been paid and (2) taxpayers made three or more 

voluntary payments to satisfy an additional tax assessed by IRS but have stopped making 

payments. The total cost to the federal government included those paid from IRS’s budget 

as well as fees paid to PCAs.

18 Given other work and limited staff, officials were deferring work on the study design until 

the use of PCAs was authorized.
Page 17 GAO-04-492 Tax Debt Collection

Although the study approach will evolve, officials said that they are 

considering selecting a sample of the same type of simpler cases that will 

be sent to PCAs and having such cases also sent to a group of IRS 

telephone collection employees. The results generated by these IRS 

employees and by PCAs would be compared to see which option is more 

effective; how effectiveness would be defined and measured would be 

determined in designing the study. This potential design would help answer 

the relatively narrow—but important—question of whether and when 

PCAs or IRS employees are a better choice for working on the specific 

types of cases to be sent to PCAs.

However, IRS officials told us that using IRS employees on these simpler 

cases would be less productive than assigning them to work on a different 

mix of collection cases. These officials said that the simpler cases IRS 

plans to assign to PCAs are generally not those cases that IRS would assign 

to any additional collection employees, if hired. IRS employees would 

work on more complex cases that fit their skills and enforcement powers 

and that have a higher priority due to such factors as the type and amount 

of tax debt or length of the delinquency. 

Generally, federal officials are responsible for ensuring that they are 

carrying out their responsibilities as efficiently and effectively as possible. 

Various federal and IRS guidance reinforces this responsibility. For 

example, according to OMB Circular A-123 “the proper stewardship of 

Federal resources is a fundamental responsibility of agency managers and 

staff. Federal employees must ensure that government resources are used 

efficiently and effectively to achieve intended program results.” OMB 

Circular A-94 states that agencies should have a plan for periodic, resultsoriented studies of program effectiveness to, among other purposes, help 

determine whether the anticipated benefits and costs have been realized 

and program corrections are needed. IRS guidance states that in selecting 

among course of action options, IRS managers should determine which is 

the most realistic and most cost effective. Further, IRS has adopted a 

critical job responsibility for its managers that specifies their responsibility 

to achieve goals by leveraging available resources to maximize efficiency 

and produce high-quality results.
Page 18 GAO-04-492 Tax Debt Collection

A study that focuses on the least costly approach to collecting a desired 

amount of tax debts would be more in line with federal guidance than the 

study that officials anticipate performing. Such a study would more likely 

answer the broader question of how IRS can be the most efficient and 

effective in achieving its collection goals. One alternative design might 

entail comparing the results of using PCAs to the results from using the 

same amount of funds to be paid to PCAs in an unconstrained manner that 

IRS determines to be the most effective overall way of achieving its 

collection goals. Determining the most effective and efficient overall way 

of achieving collection goals would undoubtedly require some judgment. 

However, because IRS is developing a new case selection model for its own 

use, after some experience is gained both with using PCAs and with new 

IRS case selection processes, IRS should have better data to use in 

determining the best way of achieving its collection goals. If using PCAs as 

expected under the current proposal meets IRS’s collection goals at less 

cost than the best unconstrained alternative, policymakers could be 

comfortable with continuing their use. If not, policy makers would have 

information available to consider whether changes in the use of PCAs 

would be appropriate.19

Regardless of the approach chosen, IRS would have to address several 

challenges in designing a study to compare the use of PCAs and IRS 

employees. For instance, contracting for PCA assistance may provide 

flexibility over hiring additional IRS staff. To recruit, select, and train the 

new staff, IRS could need many months or more and, if experienced staff 

assists in training newly hired staff, the experienced staff would not be able 

to handle normal workloads. Further, if the collection workload were to 

decrease, IRS may be able to reduce contract commitments more rapidly 

than it could reassign and, if needed, retrain IRS staff. To some extent, the 

study would have to account for similar types of direct and opportunity 

costs to hire, train, assign, and release employees of the PCA contractor. 

Accounting for these and other factors raises challenges to the design of a 

comparative study. 

19As noted earlier in this report, IRS ’s budget requests for more collection staffing have not 

resulted in increased staffing because of such factors as increased workloads in other areas 

and unfunded cost increases. If IRS were to request more staffing to reduce the tax debt 

inventory, and Congress wanted to be assured that funds would be used for this purpose, 

Congress could dedicate the appropriation. Congress has done this for selected other areas 

in which tax compliance has been a concern, such as earmarking appropriated funds to 

address concerns with overclaims for the earned income tax credit. 
Page 19 GAO-04-492 Tax Debt Collection

Because IRS would not assign cases to PCAs for collection until 2006, it 

will have time to take these challenges into account and to better ensure 

that its study would be useful to policy makers. Further, in designing the 

study, IRS would have time to identify the data that would be needed for 

the study and develop systems or processes for collecting the data. 

Conclusions IRS has an inventory of over $100 billion dollars of tax debts that has some 

potential for being collected. In recent years, IRS has deferred collection 

actions on billions of dollars of debt because it lacked collection staff to do 

the work. The growth in the backlog of unpaid taxes poses a risk to our 

voluntary tax system, particularly as IRS has fallen further behind in 

pursuing existing as well as new tax debt cases. We have placed the 

collection of unpaid taxes on our high-risk list since 1990 due to the 

potential revenue losses and the threat to voluntary compliance with our 

tax laws. 

Accordingly, we believe that effective steps need to be taken to improve the 

collection of these unpaid taxes. Because we did not analyze available 

options in this review, we are not taking a position on whether the use of 

PCAs is a preferable option. However, doing nothing more than has been 

done recently is not preferable. The compliance signals sent to taxpayers 

from the backlog of delinquent tax debts are not appropriate. When the 

majority of taxpayers receiving phone calls from IRS are those who 

respond to written IRS notices, taxpayers and practitioners may conclude 

that failing to respond to IRS is an effective tactic for avoiding tax 

responsibilities.

If Congress does authorize PCA use, IRS’s planning and preparations to 

address the critical success factors for PCA contracting provide greater 

assurance that the PCA program is heading in the right direction to meet its 

goals and achieve desired results. Nevertheless, much work and many 

challenges remain in addressing the critical success factors and helping to 

maximize the likelihood that a PCA program would be successful. 

Although IRS did an analysis that suggests that using PCAs may be a 

somewhat more efficient means to collect certain types of delinquent 

debts, that analysis was not done in a manner that informs policymakers 

whether the proposed use of PCAs is the least costly option to achieve 

IRS’s collection goals. Further, given the lack of experience in using PCAs 

to collect tax debts, key assumptions are untested. Accordingly, if 

Congress authorizes the use of PCAs, Congress and IRS would benefit from 
Page 20 GAO-04-492 Tax Debt Collection

a study that uses the experience gained with PCAs and by IRS itself in using 

new case selection processes to better determine whether and how the use 

of PCAs fits into an overall collection strategy that is designed to most 

effectively and efficiently collect delinquent taxes. Although IRS officials 

have preliminary plans to do a study that compares the use of PCAs and 

IRS employees to work the same type of cases, this study design would not 

help policymakers in Congress and the executive branch judge whether 

using PCAs as currently proposed is the best use of scarce federal 

resources.

Recommendation If Congress authorizes the use of PCAs, as soon as practical after 

experience is gained using PCAs, the IRS Commissioner should ensure that 

a study is completed that compares the use of PCAs to a collection strategy 

that officials determine to be the most effective and efficient overall way of 

achieving collection goals.

Agency Comments and 

Our Evaluation

The Commissioner of Internal Revenue provided written comments on a 

draft of this report in a letter dated May 14, 2004 (see app. III). In the letter, 

the Commissioner said that our findings would help IRS focus its PCA 

program development efforts on those areas most critical to success of the 

program if Congress authorizes IRS’s use of PCAs. He agreed that IRS had 

taken actions to address the critical success factors we identified and 

acknowledged that significant actions are yet to be done, referring to 

several key PCA program project plan steps that have not been completed. 

In response to our recommendation that, if Congress authorizes IRS’s use 

of PCAs, IRS do a study that compares the use of PCAs to a collection 

strategy that officials determine to be the most effective and efficient 

overall way of achieving collection goals, the Commissioner agreed that 

IRS would need to analyze the PCA program to determine its effectiveness 

and impact on the overall collection of delinquent taxes. He said that the 

detailed design for evaluating the PCA program will include a study to 

ensure that IRS is making the most effective and cost efficient use of total 

resources available. 

We are also sending copies to the Secretary of the Treasury, the 

Commissioner of Internal Revenue, the Director, Office of Management and 

Budget, and other interested parties. We will make copies available to 
Page 21 GAO-04-492 Tax Debt Collection

others on request. In addition, the report will be available at no charge on 

the GAO Web site at http://www.gao.gov. 

This report was prepared under the direction of Thomas D. Short, Assistant 

Director. Appendix IV also lists major contributors to this report. If you 

have any questions about this report, contact me at brostekm@gao.gov or 

Tom Short at shortt@gao.gov, or either of us at (202) 512-9110.

Michael Brostek

Director, Tax Issues
Page 22 GAO-04-492 Tax Debt Collection

List of Committees

The Honorable Charles E. Grassley

Chairman

The Honorable Max Baucus

Ranking Minority Member

Committee on Finance

United States Senate 

The Honorable William M. Thomas

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives

The Honorable Tom Davis

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives
Page 23 GAO-04-492 Tax Debt Collection

Appendix I

Trends in IRS Collections Programs, 1996- Apendxies

2003 ApendxiI

Figure 2 below shows the annual gap between the number of cases 

assigned to field and telephone collections and the number of delinquent 

accounts worked to closure (excluding accounts for which collection 

workload was deferred) expressed as a percentage of the number of cases 

assigned. 

Figure 2: Annual Gap Between Collection Cases Assigned and Cases Closed as a 

Percentage of Cases Assigned, Fiscal Years 1996 through 2003

40

35

30

25

20

15

10

5

0

-5

Percent gap

Source: GAO analysis of IRS data.

1996 1997 1998 1999 2000 2001 2002 2003
Appendix I

Trends in IRS Collections Programs, 1996-

2003

Page 24 GAO-04-492 Tax Debt Collection

Figure 3: Number of Revenue Officers Working on Delinquent Accounts, 1996 

through 2003

3,000

3,500

1996 1997 1998 1999 2000 2001 2002 2003

4,000

4,500

5,000

5,500

6,000 Number of staff

Fiscal year

Source: Data from the Treasury Inspector General for Tax Administration and IRS. 
Page 25 GAO-04-492 Tax Debt Collection

Appendix II

Actions IRS Has Taken to Address Critical 

Success Factors ApendxiI

The following appendix provides some detail on various IRS actions to 

address the critical success factors. 

Critical Success Factor—Results Orientation:

IRS envisions that the PCA program will meet the following goals:

• Increase the collection of tax debts by $9.2 billion.

• Increase the closure of tax debt cases by 17 million taxpayers.

• Reduce the tax debt backlog; and

• Increase taxpayer satisfaction by 12.5 percent.

To motivate PCAs to achieve these results, IRS is devising a balanced set of 

measures--the “balanced scorecard”--and a related performance-based 

compensation system. The performance scores on these measures also are 

to be used in determining financial bonuses and future case allocations to 

PCAs. Specifically, PCAs with above-average performance scores are to be 

eligible for monetary bonuses if they meet minimum thresholds for five of 

six performance measures. Also, the performance score is to be translated 

into a value for each PCA that is to be used to determine a proportionate 

allocation of cases for the next quarter. IRS’s intent is that the balanced 

scorecard will ensure that collection efforts are balanced appropriately in 

providing quality service; ensuring adherence to taxpayer rights; and 

complying with IRS policies, procedures, and regulations. The 

performance measures are to include the following.

• Collection effectiveness: Dollars collected as a percentage of dollars 

assigned to be collected over the contract period.

• Case resolution: Resolving cases assigned through the payment of the 

tax debts immediately or through installment payments over 3 years, 

identification of bankrupt or deceased taxpayers, or identification of 

hardships that affect the taxpayers’ ability to pay. 

• Taxpayer satisfaction: Satisfaction will be measured through random 

surveys of taxpayers on the accuracy and quality of actions taken by 

PCA employees and their adherence to various standards, and through 

taxpayer complaints.
Appendix II

Actions IRS Has Taken to Address Critical 

Success Factors

Page 26 GAO-04-492 Tax Debt Collection

• PCA employee satisfaction: Satisfaction will be measured through 

surveys of employees and their retention rates.

• Work quality: Quality will be measured through audits of PCA cases and 

telephone monitoring of interactions with taxpayers. 

• Validated taxpayer complaints: Financial penalties will be assessed and 

points will be subtracted from PCA performance scores if taxpayer 

complaints are validated. 

Critical Success Factor—Agency Resources:

IRS has set up an infrastructure to 

• administer the PCA program,

• oversee PCA contractors, and

• work on cases referred back to IRS from PCAs. 

IRS has identified initial staffing needs for the PCA program. IRS has 

estimated that 100 full-time equivalency positions (FTE) will be needed to 

initially staff the three elements of the program. IRS estimates that it will 

need 30 FTEs to administer the program and do oversight, and 70 FTEs to 

work on the cases referred back to IRS from PCAs for the first round of 

PCAs selected to work on cases. As IRS learns about its staffing needs and 

sends cases to more PCAs over time, IRS plans to adjust its staffing 

accordingly. 

Critical Success Factor—Workload:

IRS has informed PCAs that the number of cases that they receive over a 

set time period is to be based on their performance scores against balanced 

measures. IRS plans to oversee the assigned workload to ensure that PCAs 

work on the full range of simpler cases. To motivate PCAs to work on the 

full range of cases, IRS plans to measure, among other things, the extent to 

which PCAs resolve cases sent to them, including those that PCAs refer 

back to IRS without resolving the tax debt. IRS also is working on systems 

to help it identify the best cases to send to PCAs and to help it transmit and 

manage those cases.
Appendix II

Actions IRS Has Taken to Address Critical 

Success Factors

Page 27 GAO-04-492 Tax Debt Collection

Critical Success Factor—Taxpayer Issues:

IRS has drafted provisions to ensure that PCAs know that they have to treat 

taxpayers properly and make them aware of the consequences of not 

treating taxpayers properly. Proper treatment of taxpayers is one of the 

performance measures used to determine a performance score for use in 

granting monetary bonuses and case allocations for PCAs. The following 

provides examples of the draft provisions on proper taxpayer treatment.

• PCAs shall comply with all applicable federal and state laws. The 

principal federal statues and regulations currently governing collection 

activities are to be followed. Further, IRS plans to monitor PCA 

collection activities and treatment of taxpayers; any behavior that is not 

in conformance with cited federal and state laws and regulations will be 

considered a breach of contract. 

• IRS has informed PCAs that it will be conducting customer satisfaction 

surveys and that customer satisfaction is one of the key components of 

the balanced scorecard to be used to determine financial bonuses and 

future case allocation.

• IRS plans to require that PCAs inform taxpayers orally and in writing on 

how to report improper treatment by PCA employees to IRS.

Critical Success Factor—Program Evaluation

IRS has established preliminary plans for monitoring and measuring PCA 

performance through such means as conducting site visits and 

compensating PCAs according to their performance reflected in the 

balanced measures scorecard. However, IRS has deferred doing much 

work on evaluating program performance overall given the other work that 

had to be done and the resources that were available. 
Page 28 GAO-04-492 Tax Debt Collection

Appendix III

Comments from the Internal Revenue Service ApendxiI
Appendix III

Comments from the Internal Revenue Service

Page 29 GAO-04-492 Tax Debt Collection
Page 30 GAO-04-492 Tax Debt Collection

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Michael Brostek, (202) 512-9110

Thomas D. Short, (202) 512-9074

Acknowledgments In addition to those named above, Evan Gilman, Ronald Jones, John Lesser, 

Cheryl Peterson, and Jim Wozny made key contributions to this report.

(450222)
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