What to Do if the IRS Sends Your Tax Account to a Collection Agency
Did you receive a notice from IRS that your tax account was transferred to a private collection agency? This can be intimidating. But don’t fret—understanding what is going on can help ease your mind. Here’s what you need to know and do.
Why Does the IRS Use Collection Agencies?
Since late in the Obama era, the IRS has worked with private collection agencies (PCAs) to help them collect unpaid taxes. The IRS is currently required by Congress to use PCAs. These agencies must follow strict rules under the Fair Debt Collection Practices Act (FDCPA), so they can’t harass or deceive you.
Who Are the IRS Collection Agencies?
The IRS works with three private companies:
- CBE Group (Cedar Falls, Iowa)
- ConServe (Fairport, New York)
- Coast Professional, Inc. (West Monroe, Louisiana)
(the names all start with “C”, coincidence?)
Why Was My Account Chosen to Be Sent Ta a PCA?
The IRS doesn’t send ALL tax accounts to private collection agencies. Why did the IRS send mine? Some criteria that the IRS uses includes:
- Uncollectible Status: The IRS does not think they are likely to collect the debt.
- Unresponsive Accounts: The taxpayer hasn’t responded to multiple IRS notices
- Small Balance Accounts: The IRS will often choose lower priority, low balance accounts for private collection.
However, some accounts will never be sent to PCAs. Accounts involving active fraud investigations, litigation, or taxpayers in special hardship situations will remain in IRS’ hands. Understanding why your account was chosen can help you develop a strategy to move forward.
How to Know If Your Account Was Sent to Collections
The IRS will send you a letter (usually Notice CP40) if they assign your account to a PCA. BUT-make sure everything is legit!
- Check the IRS Letter: It will include the agency’s name, a special 10-digit Taxpayer Authentication Number, and instructions.
- Look for Confirmation: The PCA will send you its own letter with your authentication number. Match up this number to the IRS letter.
- Get Your IRS Transcripts: These will show updates about your account and confirm whether it’s been sent to a PCA.
- Verify the Assignment: If you have any lingering doubts, call the IRS directly and confirm with an agent.
What to Do If Your IRS Debt Is Sent to a PCA
- Know Your Rights:
- You don’t have to make immediate payments over the phone.
- All payments should go to the IRS, not the PCA.
- Collectors must treat YOU respectfully and avoid harassment.
- Stay Safe from Scams: Be careful. Real PCAs will never ask for payment through gift cards, threaten arrest, or demand sensitive information without proof of identity.
- Make Payments Directly to IRS: Don’t fall victim
- Ask for Help: A tax professional can review your account, negotiate payment terms, or explore ways to reduce your debt.
How to Stop PCA Contact and Return to IRS
If you’d rather work directly with the IRS you have options:
- Write to the PCA: Send a letter saying you don’t want to be contacted anymore and that you want your account returned to the IRS. Use certified mail to track it. The PCA is required to return your account to the IRS upon written request.
- Contact the IRS: Call the IRS to request the account be sent back. You can then work directly with the IRS on payment plans or other solutions-skip the middleman!
Resolving Your Tax Issues
To settle your tax debt—like setting up a payment plan or requesting an Offer in Compromise—you’ll need your account back with the IRS. Here’s what to do:
- Request a Transfer Back: Follow the steps above to move your account from the PCA to the IRS.
- Work with the IRS: Once the IRS has your account, you can explore options to lower or pay off your debt. A tax professional can guide you through this process.
Final Thoughts
Having the IRS send you to collections can be unsettling, but it’s manageable. By understanding the process, knowing your rights, you can take control of your situation.
If you’re dealing with tax debt, Tax Rescue CPA is here to help. We make resolving tax debt straight forward and stress-free. Contact us today to learn more about your options and start fresh.
“Who’s Doing Your Taxes?” – Tax Rescue CPA
