I received a frantic call from a new client. “HELP!  I got a letter saying that the IRS referred my debt to a collection agency.” The first question I had was why hadn’t they told me about the past tax debt. Actually, that was the only question I had, but anywho… While I totally get that collection agencies can be scary, I promise no collection agency is scarier than the IRS. If that’s the case, why does the IRS use outside collection agencies?

Use of Private Collection Agencies is Law

Congress passed a law requiring the IRS to use private collection agencies (PCAs) to help collect overdue taxes. 

Your account is sent to a PCA if:

• The IRS was unable to locate you or didn’t have the resources available to locate you. 
• A year has passed and you or your representative haven’t interacted with the IRS on your account. 
• More than 2 years have passed since the assessment and the account was not assigned for collection.

Private Collection Agencies Used by the IRS

Effective September 23, 2021, when the IRS assigns your account to a private collection agency, one of these three agencies will contact you on the government’s behalf:

CBE Group Inc.   P.O. Box 2217,  Waterloo, IA 50704   Phone:  800-910-5837

Coast Professional, Inc.   P.O. Box 425,  Geneseo, NY 14454   Phone:  888-928-0510

ConServe  P.O. Box 307,  Fairport, NY 14450  Phone:  844-853-4875

What’s the process when your account is sent to a Private Collection Agency?

You will receive two letters before you are contacted by a private collection agency.

First, the IRS will send Notice CP40 and Publication 4518. As with any other letter you receive from the IRS, open the envelope and read the Notice CP40 carefully. It will tell you that your overdue account was assigned to a PCA. It will also contain important information on what you can expect to happen next.

Secondly, the private collection agency will send their initial contact letter. It has information on how to resolve your overdue taxes.

Both letters contain a Taxpayer Authentication Number. It’s used to confirm your identity. It’s also for you to verify that the caller is legitimate. Keep this number in a safe place.

Private Debt Collection Agencies Call

Unlike the IRS, PCAs will call you, but only AFTER they have sent their initial contact letter. Here’s what you should do when a PCA calls you. 

• Validate that the caller is representing one of the private collection agencies listed above.
• The private collection agency will ask you a series of questions to verify that they’re talking to the right person.
• You will be asked for the Taxpayer Authentication Number with the private collection agency to validate each other’s identity. 
• The private collection agency will be courteous, and professional and respect your taxpayer rights while following the laws.
• The private collection agency will work with you to resolve your overdue taxes. They will NOT threaten you. If you feel the private collection agency acted inappropriately, here’s how to report it.

How do you make payments to a Collection Agency?

YOU DON’T! Even though your account has been turned over to a PCA, you only make payments to the IRS.

You can use irs.gov/payments for electronic payment options. You can use IRS Direct Pay to use direct debit (from your checking or savings account), preauthorized Direct Debit, the Electronic Federal Tax Payment System (EFTPS), or you can pay by check/money order payable to the United States Treasury.

If you use a check or money order, write your name, Social Security number, and tax year on your payment. The private collection agency will provide the appropriate IRS mailing address for the payment, or you can find it here. Even though you can mail a payment to the IRS, only use it as a last resort. Paying online is faster and more secure. 

Private Collection Agencies have no enforcement authority

Private collection agencies cannot take any type of enforcement action against you to collect your debt. However, the IRS does have the legal authority to file a Notice of Federal Tax Lien (against any property) or issue a levy (take money from your bank account) to collect an overdue account. 

Don’t want to deal with the PCA?

If you don’t want to deal with the collection agency, you can have your account moved back to the IRS. You must submit this request in writing to the PCA. 

Takeaways –

Having your account sent to a PCA isn’t the worst thing in the world. It just means that the IRS couldn’t find you. The IRS will mail letters to your last known address. If you’ve moved and haven’t filed past due returns, the IRS may not have a good address for you. They aren’t gonna hunt you down. They will simply turn your account over to a PCA.

If you have unfiled returns or unresolved tax debt, reach out to us at ETS Tax Relief: 877.482.9411.