Can the IRS Assign Your Tax Debt Case to a Private Collection Agency?

Can the IRS Assign Your Tax Debt Case to a Private Collection Agency?

If you have unpaid tax debt, the IRS might assign it to a private collection agency, or PCA. Unlike collection agencies for credit cards and other private debt, however, third-party collectors that work with the IRS do not purchase debt for pennies on the dollar.

You still owe the full amount to the IRS. The PCA is contracted to help collect your tax debt when the IRS feels it has run out of resources to do so.

When Does the IRS Assign a Tax Debt Case to a Private Collection Agency (PCA)?

The IRS might place your tax debt with a private collection agency if it meets one or more of three criteria:

  • The IRS has attempted to locate you to collect the tax debt but has been unsuccessful or feels it lacks the resources to continue trying.
  • You have not been in contact with the IRS representative assigned to your account for more than one year.
  • More than two years have passed since your tax debt was established, with no successful attempts at collection.

What Private Collection Agencies Currently Work With the IRS?

As of September 23, 2021, three agencies handle IRS private debt collection:

  • CBE Group Inc., located in Waterloo, Iowa.
  • Coast Professional, Inc., located in Albion, New York.
  • ConServe, located in Fairport, New York.

Before September 23, 2021, the IRS also worked with Performant out of Pleasanton, CA and Pioneer out of Horseheads, NY. At the time of this writing, however, the IRS no longer has contracts with these two agencies.

How Can You Verify with the IRS That Your Tax Debt Was Assigned to a PCA?

Before it assigns your tax debt to a private collection agency, the IRS will send you a notice called a CP40. Your CP40 notice includes the name and contact information of the PCA to which your tax debt is being assigned. You may also use the Get Transcript tool on the IRS website to verify your account is with a private collection agency and the name of the assigned PCA.

What Notifications or Letters Will You Receive Before You’re Contacted by a Private Collection Agency?

First, the IRS is required to send you a Notice CP40. You will receive this notice before your account gets assigned to a PCA, giving you the opportunity to contact your IRS representative with questions or, if possible, to settle your tax debt to avoid having it placed with a private collection agency.

After the assignment is made, the PCA will send you a separate notification via U.S. mail. The PCA will not attempt to collect your tax debt by phone until you have received this notification.

How Can You Confirm the Private Collection Agency Contacting You Is Legitimate and Not a Scammer?

Impersonating the IRS or an IRS collector is a popular scam, and unfortunately, it works on hundreds of people every year.

To ensure the PCA contacting you is legitimate, refer both to the notification you received from the IRS and to the one you received from the private collection agency. Both letters should contain the same Taxpayer Authorization Number that you can use to verify the legitimacy of the PCA.

Also, a legitimate PCA will never ask you to pay your tax debt via an Amazon, iTunes or prepaid debit card.

What Are Your Options to Pay Off Your Tax Debt with a Private Collection Agency?

If you are ready to pay off your tax debt that has been placed with a PCA, you have several options and can choose the one with which you are most comfortable:

  • IRS Direct Pay, which allows you to pay directly from your bank account at no fee.
  • Electronic Federal Tax Payment System, which involves a payment via phone or internet.
  • A debit or credit card using a third-party processor for a fee.
  • A check or money order payable to the U.S. Treasury.
  • A preauthorized direct debit, allowing the PCA to pay from your account on your behalf.

What If You Don’t Want to Work with a Private Collection Agency?

If you do not want to work with the private collection agency, you must let the PCA know in writing upon receiving notification that your debt is being reassigned. Alternatively, you can attempt to settle your tax debt case with the IRS before the private collection agency assignment is made.

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