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Taxpayers Defaulted on Over Half of Payment Arrangements with Private Debt Collectors

Due to the COVID-19 pandemic, which sent many people into financial turmoil, the amount of tax debts that citizens owe to private collectors has soared. When the country shut down in March of 2020, many businesses furloughed or laid off their workers, leaving those employees reliant on unemployment. The businesses themselves wound up in trouble as well, watching their customer and client bases dry up, because people couldn’t afford their goods and services. As a result, they also defaulted on any past taxes that were due. This means that more people owe back taxes now than ever before.

The Private Debt Collection Initiative

Back in 2017, the IRS started the PDC, or Private Debt Collection Initiative. What it did was take some of the collection duties off of the IRS and the federal government, and put them in the hands of several, very well trusted private debt collection companies. These companies reached out to people who owed back taxes and created payment plans to help them clear up those debts. Although it was a good idea in general, things did not go quite as well as planned.

Some Numbers to Focus On

Back in May of 2020, a report was put together showing many of the issues with the PDC program. Since its start, the IRS has given the private debt collectors over 30.1 billion dollars in delinquent tax debts to collect. That adds up the accounts of 3.28 million different taxpayers who owed back taxes. Between 2017 when the program started and May of 2020 when the report was created, only 498.4 million of those dollars have been collected. Plus, although those private debt collectors have created payment plans with over 130,000 different delinquent taxpayers, over half of them have defaulted on their payments. That leaves a lot of unpaid taxes to account for.

Low Income Taxpayers Make Up Almost Half the Debtors

Some additional statistics regarding the situation are quite alarming. According to sources, 44% of all of the people contacted by private debt collectors had incomes that were below 250% of the poverty level in the United States. Also, 40% of the people who entered into agreements with private debt collectors had incomes that were listed at below their allowable living expenses, meaning that they had tax debts that they were trying to clear up when they could not afford to pay the rent on their own home or apartment. What does this mean? That the IRS needs to develop a program to better help people pay their tax debts in an affordable manner.

If you have owe back taxes and want to enter into a payment plan with the IRS or have been contacted by a private debt collection through the PDC program and have questions, please reach out to the tax advisors at Enterprise Consultants Group. We can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.

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