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Private Debt Collection

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Station Overview

In 2017, as required by law, the Internal Revenue Service started using private collection agencies (PCAs) to collect certain overdue federal tax debts. If your federal tax debt is assigned to a PCA, you will receive letters from both the IRS and the agency. These letters contain important information for when you are contacted by the collection agency, so make sure to put them in a safe place.

This notice or letter may include additional topics that have not yet been covered here. Please check back frequently for updates.

What does this letter or notice mean to me?

If you have a balance on your tax account, the IRS is notifying you that they have assigned your tax account to a PCA for collection.

When your federal tax debt is assigned to a PCA you will receive letters from both the IRS and the agency. These letters contain important information for when you are contacted by the collection agency, so make sure to put them in a safe place. Also, the letters will let you know which PCA your tax account has been assigned too.

How did I get here?

You have a balance due on your tax account. A notice was sent to you previously letting you know how much you owe, when it was due, and how to pay. Since the IRS did not hear from you it is notifying you that it has transferred your tax account to a PCA for collection. You will also receive a letter from the PCA assigned your tax account. You have the option to pay the amount in full upon receipt of the notice. You can do so electronically at pay your taxes on IRS.gov. For specifics, see I got a notice from the IRS and Private Debt Collection Frequently Asked Questions.

What are my next steps?

The first thing to do is to check the return address to be sure it’s from the Internal Revenue Service and not another agency.

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Is it from the IRS?

If it’s from the IRS, the notice will have instructions on how to respond. If you want more details about your tax account, you can order a transcript. Also, review your notice or letter to see if there is a specific website link to visit for additional information. This is usually located at the end of the notice or letter.

If it is from a PCA, the letter should explain that your tax debt has been assigned to them and provide you with a Taxpayer Authentication Number. The PCA uses this number to verify your identity and you can use the number to confirm the PCA’s identity. See Private Debt Collection Frequently Asked Questions. Also see, Private Debt Collection Frequently Asked Questions.

If it’s from another agency, such as a state tax department, you’ll need to call that office for an explanation.

If the letter is from the Department of the Treasury Bureau of the Fiscal Service, these notices are often sent when the IRS takes (offsets) some or part of your tax refund to cover another, non-IRS debt. The Bureau of the Fiscal Service only facilitates the transfers of the refund between IRS and the agency that the balance is owed to — it won’t have information about your IRS account or where the money is being sent.

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If you disagree

If you don’t believe you owe the IRS, call the IRS toll-free at 1-800-829-1040 (or TTY/TDD 1-800-829-4059) for more information or assistance in resolving the debt. See  Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree.

If you can pay the amount in full upon receipt of the notice, you can do so electronically at pay your taxes on IRS.gov. You can also sign up to view your account information securely online. Once your federal tax debt is paid in full, then your tax account will be returned to the IRS and closed.

If you can’t pay the full amount, you need to decide which payment option might work for your situation and act to set up a payment plan or discuss other alternatives. Being proactive in addressing the tax debt may prevent additional penalty and interest charges and eliminate the need for the collection agency to contact you. For specifics, see I got a notice from the IRS and Private Debt Collection Frequently Asked Questions.

PCAs 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 or issue a levy to collect an overdue account.

If you do not wish to work with your assigned PCA to settle your overdue tax account, you must submit this request in writing to the PCA. (See No Contact Letter.)

If you do speak with the PCA, they can ask if you can full-pay your tax debt within 120 days. If you can’t, the statute allows the PCA to offer you a plan known as an installment agreement under which you may pay your tax debt in full over five years or less. If the PCA obtains IRS approval, it may set up an installment agreement for six or seven years. A PCA may not take collection action (such as filing a lien, levying your bank account, or garnishing your wages), nor may it issue a summons or report your IRS tax debt to the credit rating agencies. See Private Debt Collection Frequently Asked Questions.

You can call the IRS and explain that you do not want to pay in installments or can’t afford to do so. If you orally advise the PCA you plan to contact the IRS about collection alternatives, the PCA will place a 60-day hold on your account. If you have not reached an agreement with the IRS within those 60 days, the PCA may resume collection activity on your account. Because many actions take longer than 60 days, you may wish to write to the private collection agency to request that it stop contacting you and you no longer wish to work with them. (See No Contact Letter.)

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The Taxpayer Advocate Service is an independent organization within the IRS that helps taxpayers and protects taxpayers’ rights. We can offer you help if your tax problem is causing a financial difficulty, you’ve tried and been unable to resolve your issue with the IRS, or you believe an IRS system, process, or procedure just isn’t working as it should. If you qualify for our assistance, which is always free, we will do everything possible to help you.

Visit dev.taxpayeradvocate.irs.gov or call 1-877-777-4778.

Low Income Taxpayer Clinics (LITCs) are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, see the LITC page on the TAS website or Publication 4134, Low Income Taxpayer Clinic List.

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