The IRS will first send Notice CP40 and Publication 4518/PDF. They let you know that your back tax account was assigned to a private collection agency. The private collection agency then sends your initial contact letter. It contains information on how to resolve your back taxes.
The IRS will always notify the taxpayer before transferring their account to a private collection agency (PCA). The IRS may try to collect the money through garnishment and liens on your assets, or sometimes the IRS will assign private contractors to collect tax debts. The IRS uses private companies only when the IRS has done its best to collect. If the IRS assigns your case to a private company, it will notify you and provide you with security information so that you can identify the private collector as legitimate.
If you have an unpaid tax debt, the IRS may assign it to a private collection agency (PCA). However, unlike credit card and other private debt collection agencies, outside collectors who work with the IRS don't buy debts for cents on the dollar. The IRS uses the information from your previous returns, plus the income information reported by your employer, to file this return without the benefit of deductions or credits. There are also options for people who cannot pay any payments, such as the current non-collectible condition, which pauses payments and collection, and the compromise offer, which allows them to settle their tax debt for less than what they owe.
Private companies are allowed to discuss payment options, including establishing payment agreements with taxpayers. The PCAs provide the IRS with the scripts it will use for approval, but the reality is that the IRS does not review recorded calls or closely monitor the operations of the IRS collection agencies. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act and must be courteous and respect the rights of taxpayers. Ignoring an IRS tax bill is never a good idea, because the notice starts the countdown to IRS collection.
Private collection agencies are motivated by a fee structure to force the most vulnerable taxpayers to sign payment agreements in installments they cannot pay. For example, an account could be unknowingly referred to a private collection agency that could qualify for currently uncollectible status (CNC), that is, to the situation of economic difficulties. To make sure that the PCA contacted you is legitimate, check both the notification you received from the IRS and the one you received from the private collection agency. If you don't want to work with the private collection agency, you must inform the PCA in writing upon receiving notification that your debt is being reallocated.
Only people with specific circumstances will qualify for these options, so it's a good idea to seek the help of a tax professional to understand and analyze your options. But for now, the program is underway, so you should let him know if a private collection agency contacts you on behalf of the IRS. We created the Wiztax system to allow anyone to start the process of solving their tax problems online and filing them without having to spend thousands of dollars on expensive lawyers or tax resolution firms. Before assigning your tax debt to a private collection agency, the IRS will send you a notification called CP40.
You will receive this notice before your account is assigned to a PCA, allowing you to contact your IRS representative if you have questions or, if possible, settle your tax debt to prevent it from being deposited with a private collection agency.
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