What is a CP40 IRS Notice?

CP40 IRS Notice In The Mail

If you receive a CP40 notice, that means that the IRS assigned your account to a private collection agency. If this happens, you can work with the collection agency to set up payments or request to have your account sent back to the IRS for direct negotiation.

To protect yourself and your finances, contact us at Wiggam Law to discuss the best steps forward when receiving a CP40 notice. We can help you find the right solution for your tax debt.

Key Takeaways:

  • CP40 Notice – The IRS has assigned your account to a private collection agency.
  • Verify the collector using the taxpayer authentication number on the notice.
  • Contact the IRS if you’re worried about a tax scam.
  • Set up payments with the collection agency.
  • Request to have your account returned to the IRS for other solutions.

What is IRS Notice CP40?

Notice CP40 tells you that your tax debt has been assigned to a third-party for collections. Besides telling you that your account is now in the hands of a collection agency, the CP40 will tell you:

  • What happens next (or future collection actions)
  • What actions you need to take to clear the debt
  • Who you need to contact to make arrangements for the taxes owed

The CP40 notice is virtually indistinguishable from the CP140 notice. You may receive either notice if your account is assigned to a private collector. Whichever one you get, stay calm – it’s not too late to take action. This guide to navigating the CP40 notice gives you the tools you need to understand and move toward clearing your tax debt.

What is a CP40 Notice?

In simple terms, a CP40 notice means that private debt collectors have taken over your tax account from the IRS. Some debt balances go inactive because the account is old and without activity or because the IRS couldn’t reach you.

If you’re getting a CP40 notice, no matter what the outside reason is, the ultimate reason is one (or both) of the following:

  • You didn’t take action on your debt after getting multiple forms of contact from the IRS
  • The IRS could not reach you about your tax debt.

For example, you could get a CP40 notice if you forget to file your taxes one year and the IRS assesses a tax balance against you. However, they send letters to your old address, and you never see them. You could also get the notice if you stop making payments on a payment plan and then fail to respond to all the communication from the IRS about your tax debt.

If you get a CP40 notice, it’s very important for you to take action about your tax debt immediately. Don’t wait to respond to the collection agency or the IRS – the longer you wait, the more penalties and interest will accrue.

What’s the Difference Between a CP140 and CP40 Notice?

There’s no real difference between the CP140 and CP40 notices. They both state that your tax account has been moved to a third-party collector, and you should take action now. If you have old tax debt, you could receive either notice.

What to Do if You Get a CP40 Notice

When you get a CP40 notice, you should confirm that the collection agency listed on the notice has your debt account. After that, contact them immediately to make payment arrangements for your tax debt.

If you prefer, you can work with the IRS to resolve your tax debt. To transfer your tax debt account back to the IRS, send your preference in writing to the collection agency.

Here’s what you should do after you get a CP40 notice:

Confirm That the Agency Named on the Notice Works With the IRS

Before you act, always confirm that the agency on the notice actually has a partnership with the IRS. There’s been an unfortunate uprising in scam artists pretending to be collection agencies to collect fraudulent payments.

Luckily, there’s an easy way to confirm that the letter and agency are both legitimate. All you have to do is:

  • Visit the IRS website
  • Search for the keyword “private debt collection”
  • Find your collection agency’s name in the search results. (If it’s not there, then it may be a fraudulent notice)
  • Contact a tax attorney if you’re unsure

You can also check the Private Debt Collection Page of the IRS website to see a list of the agencies currently working with the IRS.

In addition to the CP40 notice from the IRS, you’ll receive a letter from the private agency that got your account. The letter will state that they’re under a contract with the IRS to collect a debt. Before taking action, you should ensure you received both letters and confirm that the information is the same (and legitimate) in both.

Check the Agency’s Taxpayer Authentication Number

Both of the letters you receive – the CP40 from the IRS and the one from the private collection agency – contain a taxpayer authentication number (TAN) that the agency will use to confirm your identity.

You can match that TAN across both letters to make sure that they’re definitely legitimate. When you talk to the collection agency, you provide them with half of the number, and they provide you with the rest of it. That’s how both you and the agency put yourselves at ease.

Arrange to Pay the IRS

Get in touch with the collection agency right away to make plans to pay your tax debt. Remember that even though you’re making payment arrangements with the agency, you’ll be paying the IRS directly.

The collection agency processes your payment via phone, but it’s the Department of Treasury that actually handles the payment to the IRS. If you prefer, you can make a payment online using IRS Direct Pay or EFTPS.

The collection agency can help you arrange to:

  • Pay in full
  • Make a partial payment
  • Enter into a payment arrangement

You won’t be able to apply for any tax settlement programs for relief, such as offers in compromise or innocent spouse relief through a collection agency. You can do that directly with the IRS or find a tax professional who can help.

Learn About Your Rights

It’s a sad truth that debt collectors can be intrusive and unethical. You should know your rights under the Fair Debt Collection Practices Act (FDCPA).

For instance, the FDCPA says that collectors cannot:

  • Call you before 8 AM or after 9 PM
  • Call you at work or on your cell if you asked them not to
  • Continue to call you after you send a letter requesting that they stop
  • Share your information with third parties
  • Harass you or make threats.

If collectors are reaching out to you despite your request to stop, you should seek the help of a tax attorney as soon as possible. Unfortunately, not long after the IRS started using private collectors, the collectors were accused of using illegal and/or abusive practices to collect debts.

Although those accusations are a few years old, nothing has been done to correct the problem. Policy analysts claim that private debt collectors have a significantly worse impact on poor taxpayers.

You should also be aware of your rights as a taxpayer.

  • Right to be informed.
  • Right to quality service.
  • Right to pay the correct amount of tax.
  • Right to challenge the IRS and be heard.
  • Right to appeal.
  • Right to finality.
  • Right to privacy and confidentiality.
  • Right to a fair and just tax system.

If you feel that the collection agency is not respecting your taxpayer rights, reach out to the IRS and report them. Also, consider talking with a tax attorney. You also have the right to be represented when dealing with the IRS.

Ask the IRS to Take Your Account Back From the Collectors

If you’re more comfortable working with the IRS to handle your tax debt, they will work with you. You must alert the collection agency in writing. However, you can start with a verbal request if desired.

How to Handle Tax Debt on a CP40 Notice

No matter how old your tax debt is, it’s not too old to deal with it after you get a CP40 notice. Here are some tips to help you get back into compliance:

File Your Back Taxes (If Applicable)

You should still file your back taxes if you neglected to file a return years ago, and the IRS finally issued a substitute for return to assess taxes against you. The IRS is notorious for overstating when it comes to your tax liability (and debt), and if you file a correct return, you may be able to lower your tax bill.

You might want to leave your taxes unfiled if:

  • The IRS-assessed balance is lower than it would be if you filed
  • You’re likely to receive an offer in compromise that lowers your tax bill to negligible amounts
  • The statute of limitations on the collection of the taxes owed is close to expiration

Check with a tax expert if you’re not sure – they can help you decide whether to file and how to proceed if you choose to file.

Pay Your Whole Tax Balance

Paying your entire tax balance in one fell swoop is the dream, and it’s the preferred option if you can comfortably afford it. This eliminates the extended costs of tax debt, like interest and penalties.

Of course, not everyone can afford to pay their entire tax balance. Some people choose to take out loans to pay tax bills, which can be economical if the interest rate is low.

Settle With an Offer in Compromise

An offer in compromise is a way to deal with your tax bill up front, even if you can’t afford to pay it off in full. If that’s the route you choose to take, you’ll need to talk to the IRS directly. A collection agency cannot negotiate an offer in compromise.

As part of the application process, the IRS will require details about your finances to demonstrate that paying in full would be a hardship. If you’re approved, you’ll get to make payments over a 24-month period or pay off the reduced balance.

Negotiate a Payment Plan

The most common option for paying off your taxes is a payment arrangement with the IRS. The collection agency can help you set this up. Be open to offers and aim for a reasonable monthly payment that you can afford. The IRS may require that you provide more information about your life and financial situation to decide if the payment arrangement is needed.

What Happens When You Ignore a CP40 Notice

The collection actions can escalate when you don’t respond to a CP40 notice. As long as you continue to be unresponsive, the agency will continue trying to contact you.

In some cases, collection agencies call people associated with you—like family, friends, and professional colleagues—trying to get in touch with you. They cannot reveal your personal details, but they can call third parties while doing skip tracing to find your contact details.

Can Collectors Take Legal Action for Tax Debt?

Private debt collectors aren’t allowed to take any enforcement actions against you to collect your tax debt. That means forced collection actions such as garnishments, liens, or levies. If a collector threatens to take forced collection actions, tell them they don’t have the right to do so.

While a collector can’t file a lien or a levy, the IRS can. You aren’t entirely safe from forced collection actions as long as your debt is unpaid and no arrangements are made to pay it.

Signs You May Be Facing a Scam

Remember, a legitimate collection agency will never require you to make payments to any entity besides the Department of the Treasury. They won’t accept payments made out to the collection agency, and they won’t ask for odd types of payments such as gift cards or wire transfers.

If you’re worried that you’re facing a scam, simply hang up. You can double-check whether or not your account has been assigned to a third party by looking at your IRS account online or by calling the IRS. You can also use the tips listed above to check the legitimacy of the collection agency trying to contact you.

How to Avoid Getting a CP40 Notice

There’s a way to avoid a CP40 notice that just can’t fail: pay your tax bill! Don’t let your tax account get so old that the IRS doesn’t want to deal with it anymore. You can’t know if you’re at risk before it happens because the IRS isn’t open about how they outsource accounts. Know that paying your tax obligations means you have zero chance of getting a CP40 notice.

FAQs About Private Collections of IRS Tax Debt

Which collection agencies does the IRS use?

Since 2021, the IRS has worked with the following collection agencies: CBE Group, Coast Professional, Inc., and ConServe. This information is current as of 2025.

What if I already paid in full?

Tell the collector that you already paid in full and provide them with information about your payment. You can also call the IRS to check that the payment was credited correctly.

How can I make payments to the collection agency?

The collection agency can help facilitate a payment to the IRS. You can provide the agency with your debit or credit card details or your bank account details for a one-time or monthly recurring payment.

You can also let the collector know that you will be making payments through one of the following methods: IRS Direct Pay, EFTPS, IRS online account, or through the mail.

Get Tax Help Dealing With Your CP40 Notice

If you’ve never responded to a tax notice before – or even if you have – dealing with the IRS is just more comfortable with an expert’s hand to guide you. The tax attorneys at Wiggam Law can help you deal with the tax issues you’re having now.

Don’t let your taxes wait. Contact us today to schedule a consultation and see how we can help you. We will help you find personalized solutions to your tax problems.

Schedule a consultation with our team or call us at (404) 233-9800.