Does the IRS Use Collection Agencies?

Collection notices from private debt collectors for the IRS

Does this situation sound familiar to you? Three or four years ago, you fell on hard times, as many of us did, and ended up with unpaid back taxes. It’s been a long time since you’ve heard from the IRS; maybe you’ve moved a few times since then. Just when it seems they might have forgotten about you, you receive a notification that your tax debt is in the hands of a private collection agency. How worried should you be?

Scammers and imposters will often use the guise of a private collection agency to scare and swindle taxpayers out of their money. However, there are legitimate circumstances for which the IRS and a collection agency will work together to ensure that unpaid tax burdens are collected.

Finding out that the IRS and a collection agency are working together to collect back taxes from you doesn’t have to feel frightening or stressful. In this article, we’ll demystify how and, most importantly, when and why the IRS is using private debt collectors. You’ll also learn what it means for your tax account when a private debt collector is assigned to your case.

Is the IRS using Private Debt Collectors?

The IRS does use private collection agencies, as per a 2015 mandate by Congress. In particular, IRS debt collection efforts currently rely on three specific private debt collectors to help the agency collect back taxes from inactive taxpayers in specific circumstances:

  • CBE Group, Inc.
  • Continental Service Group (ConServe)
  • Coast Professional, Inc.

Originally, per the 2015 mandate, the IRS partnered with Performant Recovery, Inc. and Pioneer Credit Recovery in addition to CBE and ConServe, but in 2021, when the IRS’s original contracts expired, only CBE and ConServe renewed their contracts.

Why Congress Mandated that the IRS Use Private Debt Collectors

In 2015, Congress required the IRS to hire private collection agencies, starting in Spring 2017, to collect inactive tax receivables as part of the Fixing America’s Surface Transportation Act. What are inactive tax receivables? Put simply, they’re uncollected tax debts that the IRS itself lacks the resources to collect in a timely fashion.

IRS debt collection resources are not infinite. If the agency cannot locate or contact a taxpayer with unpaid back taxes or cannot assign an IRS agent to collect the debt, it risks running out the statute of limitations to collect. To avoid these situations, Congress mandated that the IRS use private debt collectors in the following situations:

  • The IRS has labeled a case “inactive” due to an inability to locate or contact the taxpayer in question
  • The IRS has no agents of its own to assign to collect the debt
  • More than one-third of the 10-year collection statute of limitations has passed

This Congressional mandate provides the IRS with greater resources to collect from “inactive” delinquent taxpayers by requiring them to partner with the specific collection agencies mentioned above.

The Role of Private Debt Collectors in the IRS

While the IRS uses collection agencies in dealing with inactive tax receivables, the actual duties, responsibilities, and authority of these agencies are quite limited. IRS private collection agencies do not have enforcement authority and cannot file liens or issue levies on your assets in order to claw back unpaid taxes.

Unlike the IRS itself, private debt collectors in partnership with the IRS also cannot:

These are authorities only the IRS has to lighten the burden of your back taxes.

What private debt collectors can do is directly contact taxpayers that the IRS has had difficulty locating or contacting on its own and inform them of their debt. Rather than collecting tax receivables themselves, collection agencies are entitled to a percentage of the tax receivables the IRS collects from inactive taxpayer accounts in exchange for locating the taxpayers and forwarding them to the IRS.

Put simply, IRS debt collection agencies are middlemen between you and the IRS. Their only purpose is to help the IRS connect with non-responsive taxpayers that they lack the resources to deal with on their own.

How to Know if the IRS is Using Collection Agencies for Your Back Taxes

The IRS will always notify you in the event that your back taxes are assigned to one of its collection agencies. In fact, the IRS is legally required to notify you through official IRS communications before the responsibility for collecting your tax debt is given to one of the four collection agencies it works with.

Here’s how the process of having your tax debt assigned to a collection agency works:

  1. The IRS sends an official CP40 notice informing you that your tax account has been assigned to a private collection agency.
  2. The IRS sends you Publication 4518, which explains what it means to have your account assigned to a collection agency and what you can expect.
  3. Then, and only then, your assigned collection agency will contact you, first by letter, then by phone.
  4. The duty of your assigned collection agency is to forward you to the IRS so you can work with them to resolve your tax burden.

How to Tell a Legitimate IRS Collection Agency From a Scam

As we all know, there are a lot of scams that involve impersonating an IRS agent or an IRS collection agency in order to scare taxpayers who may be struggling with back taxes or other tax problems. Here’s what to keep in mind to make sure you don’t let tax scammers intimidate and fool you:

  • The IRS will only ever contact you with any important information—such as a private collection agency being assigned to your account—by certified mail, never by phone or email.
  • Make sure to check any document from the IRS that arrives in the mail carefully to ensure the document is legitimate. For example, double-checking the return address can help uncover a fake.
  • Your CP40 document will have a taxpayer authentication number, which will match the taxpayer authentication number included in the collection agency’s letter. The two numbers must match.
  • You will only be contacted by one of the collection agencies that currently has a contract with the IRS.
  • A legitimate collection agency will never ask you to use untraceable payment methods, such as gift cards or prepaid debit cards. Rather, their entire purpose is to forward you to the IRS to work directly with them.
  • A legitimate collection agency cannot work out deals for installment agreements, Offers in Compromise, or other methods to alleviate your tax burden. Only the IRS can do that.
  • IRS-affiliated private collection agencies, like all legitimate debt collectors, cannot threaten you, harass you, lie, or treat you unfairly.

Having back taxes weighing you down is never fun, but finding out your tax account has been assigned to an IRS collection agency doesn’t mean your situation has gotten worse. At Wiggam Law, we can help you deal with your tax burden, talk to the IRS and private collection agencies to negotiate various resolution strategies and get your life back on track.

Call us today at (404) 233-9800 or fill out our consultation form below to get started and find out what you can do to get the IRS and debt collection agencies off your back.