The IRS established its Private Debt Collection program in 2016 after Congress passed a federal law that requires the IRS to contract with Private Collection Agencies, or PCAs. The agencies are hired to assist the IRS in collection action with certain outstanding, inactive tax debts on the government’s behalf.
Read on to learn more about why your IRS account may have been assigned to a PCA, what you should expect when this happens, and what steps you should take to resolve your tax matter.
As of September 2021, the IRS renewed its contracts with the following 3 Private Collection Agencies:
CBE Group, Inc.: PO Box 2217, Waterloo, IA 50704 – Phone: (800) 910-5837
Coast Professional, Inc.: PO Box 526, Albion, NY 14411 – Phone: (888) 928-0510
ConServe: PO Box 307, Fairport, NY 14450 – Phone: (844) 853-4875
Why was my IRS account assigned to a private collection agency?
The IRS has been experiencing issues in recent years not having enough staff or resources to attempt collection action on every account with overdue taxes. With the help of the PCAs, this allows the IRS to have a better shot at collecting on your unpaid tax liability. The agencies mainly get assigned to accounts with unpaid balances that the IRS is not actively working (especially older accounts).
Other reasons that your account could be transferred to a PCA for collection of your unpaid tax liability include:
- The IRS lacked the staff/resources or could not locate you
- A year has passed, and you or your third-party representative have not interacted with the IRS on your account
- More than 2 years have passed since assessment and the account was not assigned for collection
One important thing to note is the IRS has excluded certain accounts from being transferred to a PCA. The IRS would not have assigned your account to a PCA if you are:
- Under 18 years of age
- In a designated combat zone
- The victim of tax-related identity theft
- Recipient of supplemental security income (SSI) or social security disability insurance (SSDI)
- Adjusted gross income does not exceed 200% of the applicable poverty level
- Currently under examination, litigation, criminal investigation, or levy
- Subject to pending or active offers in compromise
- Subject to an installment agreement
- Subject to a right of appeal
- Classified as an innocent spouse case
- In a presidentially declared disaster requesting relief from collection
What should I expect from the IRS and PCAs?
It is extremely important to know that the IRS will always provide taxpayers with written notice before transferring any accounts to a Private Collection Agency.
Here’s how they will initially contact you about your tax bill.
Before you are contacted by one of the contracted agencies, the IRS will send you a CP-40 notice in the mail which informs you that your IRS account is being referred to private debt collection agency, or may read along the lines of, “Your account has been placed with a contractor for the Internal Revenue Service”. The CP-40 will include the name and contact information for the PCA, along with a copy of the IRS’ Publication 4518, “What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency”.
Following the CP-40 notice from the IRS, the PCA will initially contact you with their own separate letter that confirms their assignment of your unpaid tax liability. The PCA will not contact you by phone prior to sending you the confirmation, but they will call you after sending the initial letter to try and collect the unpaid taxes. The PCA will identify themselves as contractors collecting taxes on behalf of the IRS.
To try and protect your privacy and security, both letters will contain information that will help you identify the tax amount owed and assure you that future collection agency calls you may receive are legitimate. Specifically, both letters will contain your Taxpayer Authentication Number which is used to confirm your identity and is also for you to verify the caller is legitimate. You will want to keep this number in a safe place.
A PCA cannot take legal action against you if you do not pay your tax bill – only the IRS can.
PCA employees must be courteous and must respect taxpayer rights and follow the provisions of the Fair Debt Collection Practices Act. Even though the agencies are contractors for the IRS, they are not actually authorized to take collection actions against taxpayers (i.e., filing a notice of Federal Tax Lien or issuing a levy) because only IRS employees can take these actions. The PCAs are only authorized to discuss payment options and to set up payment agreements with taxpayers.
How can I be sure that a legitimate IRS contracted PCA is contacting me, and not a scammer?
The IRS has disseminated a great deal of information on identifying scammers who reach out claiming to be the IRS. They’ve previously asked taxpayers to beware of any phone calls attempting to collect, arguing that the IRS does not primarily use phone to reach the taxpayer. However, the PCA’s will reach out by phone after first contacting by mail, which can cause some confusion and uncertainty felt by the taxpayer when they receive a phone call with an unknown company attempting to collect tax debt on behalf of the government.
It is unfortunate that many scammers imitate the IRS and use mail and phone calls to scare people into giving them money. If you ever receive a notice requesting you to make a payment but aren’t sure if you owe the government money, you should reach out to a tax attorney to look over the letter and let you know if it is legitimate or not. There are also a few different ways that you can verify if the PCA trying to contact you is legitimate.
First, you should review the names of the PCAs above, as they are currently the only PCAs that are being contracted by the IRS.
Second, the IRS and the PCA both should have sent you a letter in the mail prior to calling, and both letters should contain your Taxpayer Authentication Number. The PCA uses this number to verify your identity and you should also use it to confirm the PCA’s identity.
Third, the PCAs will never ask for direct payment to them, or ask for payment on a prepaid debit, iTunes, or gift cards. It is extremely important to remember that all legitimate payments will be made directly through either the U.S. Treasury or the IRS, not the private collection agency.
What should I do after receiving a CP-40 notice, and what are my options for paying off my debt with a private collection agency?
When you receive a notice from the IRS, you should first thoroughly read the letter and review the details to make sure you fully understand it. Do not ignore the letter and make sure to keep any notices you receive from the IRS or a PCA for your own personal records.
How to resolve your balance with a PCA
It is highly recommended to consider getting help from a tax professional before responding to a CP-40 or responding to a PCA. You should attempt to get your account transcript from the IRS to verify that your account was transferred to a private collection agency. The PCA will call after sending out the initial letter, so you should be prepared to verify that the caller is representing one of the private collection agencies listed above. They will then ask you a series of questions to make sure they are talking to the correct person. You will need to have your Taxpayer Authentication Number on hand for this verification process.
If you owe a balance and are fully capable of paying that balance, you can follow the instructions on the notice to make your payment. If you cannot make a payment, you should heavily consider speaking to a tax attorney about negotiating a payment plan on your behalf with the IRS. Either way, you need to ensure that your tax matter is taken care of in a timely manner. Failing to pay your tax liability can cause additional interest and penalty charges on your account, and the longer you wait, the worse it gets.
The sole job of the IRS is to collect the taxes you owe them – so they are not eager to discuss how to make repayment of your tax debt affordable or beneficial to your overall financial status. Hiring a professional to do the work for you almost always ensures a better result. It’s a complicated process, with many avenues our team can pursue to resolve your tax matter that you may not be aware of.
Getting Assistance from a Tax Professional
If you have received a CP-40 from the IRS or letters from a PCA regarding your unresolved tax liability, reaching out to a reputable tax professional could significantly reduce your confusion and stress. When you choose Polston Tax Resolution, you can expect a step-by-step process that we support and guide you through from start to finish. Hiring a professional is the safest way to handle negotiations with the IRS and its PCAs. Polston Tax is one of the few top-rated tax resolution companies that is fully equipped to help solve your tax problems!
Contact us to learn more about how we can lift the weight of tax problems off your shoulders, and help you make the leap towards financial freedom. Call (844) 841-9857 or visit https://polstontax.com/services/ to schedule your free consultation today!