IRS sending overdue tax accounts to collections

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You may have received or will receive a CP40 Notice from the IRS. What is it? A CP40 Notice notifies taxpayers that their overdue tax accounts have been assigned to a private collection agency. Your account may have been placed with a private collection agency tax because you met certain criteria such as the inability of the IRS to locate you, more than a year has passed since you interacted with the IRS on your account or more than two years passed since assessment and your account was not assigned for collection. The IRS is required by law to contract with private collection agencies on certain accounts with unpaid tax liability. Posted on the IRS website is an example of the IRS CP40 Notice.

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The CP40 letter contains the name, address and phone number of the agency assigned to your account and the tax form and tax year(s) of the overdue amounts. The letter also includes information on your payment options. You can search the IRS site for a list of the agencies that are currently under contract with the IRS and may contact you. There are some important things to be aware of as the private collection agency will not request payment be made directly to them or on a prepaid debit, ITunes or gift card. They will not take any type of enforcement action such as issuing a levy or Notice of Federal Tax Lien, charge a fee for setting up a payment agreement or decide to accept or reject an offer in compromise or report an account as currently not collectible.

What do you need to do?

  • Read the notice to find out next steps
  • File tax returns you are required to file
  • Keep a copy of the notice for your records and complete the two-party verification with the private agency
  • The agency will contact you from the number on the notice or you can reach out to them

The private collection agency will verify your personal information to protect the security of your tax information. They will perform two-party verification by asking you for the first five numbers of your taxpayer authentication number shown at the top of your notice. The private collection agency will then supply the next five numbers.

The agency will be able to work with you to set up a payment plan for the tax owed or pay the amount in full. Also, if the tax liability was already paid, they will make sure the payment is applied appropriately to your account. I cannot stress enough that all payments are made to the IRS. The private collection agency can and should provide you with information on ways to pay your tax. You can also visit irs.gov/payments to view the array of options for payment.

The law includes strong protection of taxpayer rights such as agencies being held to same standards as IRS employees and privacy laws are strictly enforced. If you do not want to work with your collection agency, then you need to submit a request in writing to the agency.

To learn more regarding your rights as a taxpayer visit Publication 1. If you have any questions, contact a Henry+Horne professional for more information.

Hannah Boyd