In 2017, as required by law, the Internal Revenue Service started using private collection agencies (PCAs) to collect certain overdue federal tax debts.
If you have a balance due and the IRS assigns your tax debt to a PCA for collection, you will receive letters from both the IRS and the PCA. These letters contain important information for when you are contacted by the PCA, so make sure to put them in a safe place. The letters will also let you know which PCA your tax debt has been assigned to.
You have a balance due on your tax debt. A notice was sent to you previously letting you know how much you owe, when it was due, and how to pay. Since the IRS did not hear from you it is notifying you that it has assigned your tax debt to a PCA for collection.
If you received a Notice CP40 from the IRS, keep the notice for your records. It contains a taxpayer authentication number that the PCA will use to verify your identity and you will use to confirm the PCA identity. You should receive a letter from the PCA containing the same taxpayer authentication number. See Private Debt Collection Frequently Asked Questions.
If it’s from another agency, such as a state tax department, you’ll need to call that office for an explanation. Being proactive in addressing the tax debt may prevent additional penalty and interest charges and eliminate the need for the PCA to contact you.
If you can pay the amount in full upon receipt of the notice, you can do so electronically at pay your taxes on IRS.gov. You can also sign up to view your account information securely online at IRS.gov. Once your federal tax debt is paid in full, then your tax debt will be returned to the IRS and your case will be closed.
If you speak with the PCA, they can ask if you can full-pay your tax debt within 120 days. If you can’t, the PCA is allowed to offer you a payment arrangement under which you may pay your tax debt in full over seven years or less. You should not agree to make a monthly payment you cannot afford.
If a payment arrangement is not possible due to your financial situation, you can request that your case be returned to IRS to determine if another payment option may work for your situation. If you orally advise the PCA you plan to contact the IRS about collection alternatives, the PCA will place a 60-day hold on your account. If you have not reached an agreement with the IRS within those 60 days, the PCA may resume collection activity on your account. Because many actions take longer than 60 days, you may wish to write to the private collection agency to request that it stop contacting you and you no longer wish to work with them. (See No Contact Letter.)
PCAs cannot take any type of enforcement action (such as filing a lien or issuing a levy) against you to collect your debt nor may it issue a summons or report your IRS tax debt to the credit rating agencies.
You are not required to work with the assigned PCA to settle your tax debt. You may request that the PCA return your tax debt to the IRS. You must submit this request in writing to the PCA. (See No Contact Letter.)
What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency
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