Previously, we discussed Congress’s enactment of the FAST Act requiring the IRS to use private debt collection agencies to recover inactive tax receivables. In September, the IRS announced that it had contracted with four collection agencies to begin private collection, and last week, the IRS posted to its website a sample of the letter it will send to some taxpayers to notify them that their overdue account has been assigned to a private collection agency (Notice CP40). A copy of the letter can be found here.
The letter contains the name, address and phone number of the private collection agency and notes the following:
- The private collection agency will explain payment options.
- The private collection will provide the taxpayer with a payment plan if the taxpayer can’t pay the full amount.
- Taxpayers should go to www.irs.gov/payments for information about how to pay an account that was transferred to a private collection agency.
- The private collection agency is required to maintain the security and privacy of the taxpayer’s tax information. To do this, it will ask the taxpayer to provide their name and address of record before assisting the taxpayer in resolving his account. Also, it will perform two-party verification by asking the taxpayer for the first five numbers of their taxpayer authentication number at the top of the CP40. The private collection agency will then provide the subsequent five numbers.
The letter also suggests that the taxpayer refer to Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency. Publication 4518 can be found here and provides answers to questions taxpayers may have when their account has been assigned to a private collection agency including:
- What will the private collection agency do?
The private collection agency assigned to your account is working on behalf of the IRS. They will send you a letter confirming assignment of your unpaid tax liability and then contact you to resolve your account. They will explain the various payment options and help you choose one that is best for you.
- How can I be sure it is the private collection agency calling me?
The private collection agency will send you a letter confirming assignment of your tax account. The letter will include the same unique taxpayer authentication number that is on the letter sent to you from the IRS.
- Who do I make my payments to?
Make all payments to the IRS. The private collection agency can provide information on ways to pay.
Helpful Tips
The private collection agencies must abide by the consumer protection provisions of the Fair Debt Collection Practices Act (the “FDCPA”) and have agreed to be courteous and respectful of taxpayer rights. Under the FDCPA, if a taxpayer sends the private collection agency a letter stating that it does not want to work with the private collection agency and requests that the case be handled by the IRS, the private collection agency must honor the request.
In addition, it is important for taxpayers to be on the lookout for scams, especially around this time of year. Taxpayers should only make payments to the IRS, not the private collection agency. There are electronic payment options for taxpayers on IRS.gov and payments by check should be payable to the U.S. Treasury and sent directly to the IRS, not the private collection agency.