Client Update: Is The Private Collection Agency Calling Your Client Legitimate?

Taxpayers who owe taxes might get a call from a private collection agency working on behalf of the IRS. This article explains how to know when it’s a legitimate IRS authorized private collection agency calling and not a scammer.

Private collection of tax debts. Under Code Sec. 6306 , the IRS must hire private collection agencies (PCAs) to collect certain ” inactive tax receivables .”

Inactive tax receivables are tax debts that IRS employees are not actively working to collect. Generally, these tax debts are assigned to PCAs using the following criteria:

The IRS lacks the resources to pursue the debt or couldn’t locate the taxpayer
Neither the taxpayer nor their representative interacted with the IRS on the account in over a year
The assessment is more than two years old and the account hasn’t been assigned to an IRS employee for collection.
IRS procedure.

Once the IRS determines that a taxpayer’s account can be assigned to a PCA, the IRS will give taxpayers and their representatives written notice ( Notice CP40 ) that the account is being transferred to a PCA. This mailing will (a) provide the PCA’s name, address, and phone number, and will address frequently asked questions on private debt collection; (b) include phone numbers if a taxpayer wants to contact the IRS office overseeing the PCA or the Taxpayer Advocate Service (TAS); and (c) explain that a taxpayer may request in writing to work with the IRS instead of a PCA to resolve the debt.

This letter will also contain a Taxpayer Authorization Number (TAN), which will be used to verify both the PCA and the taxpayer.

Currently, the IRS works with three PCAs:

CBE Group, Inc.
Coast Professional, Inc., and
ConServe

PCA responsibilities

The PCA assigned to the taxpayer’s account will send a separate notice to the taxpayer and their representative identifying itself as a contractor collecting the taxpayer’s taxes on behalf of the IRS. The PCA’s letter should contain the same TAN as the IRS’ letter. The taxpayer must receive both the IRS and the PCA letters before the PCA can begin working with the taxpayer.

The PCA should ask for this number to verify the taxpayer’s identity when contacting the taxpayer about their tax debt. The taxpayer can also use the TAN to verify that the person contacting them is working for the PCA assigned to their account.

Once the taxpayer verifies the person calling (including asking the caller’s name and the name of the agency they are working for) using the TAN, they can listen to what the caller has to say.

PCA employees must follow provisions of the Fair Debt Collection Practices Act and should be courteous and respect taxpayer rights , including the taxpayer’s right to request that their account be sent back to the IRS for collection.

A PCA can help the taxpayer to address any outstanding tax debt by setting up a payment arrangement if the taxpayer can pay their tax debt in full within seven years or before the collection expiration date. If the taxpayer needs an installment agreement that lasts longer than seven years, the account must be returned to the IRS.

In addition, the account must be sent back to the IRS if the taxpayer wants to make an offer-in-compromise, or to set up a partial payment installment agreement.

Note: A PCA is required to inform the taxpayer about the electronic payment options offered by the IRS (see IRS.gov/pay) and that all other forms of payments (wire transfer, checks) must be sent directly to the IRS.

Note: A PCA can’t require any tax debt to be paid by prepaid debit, iTunes, or gift card or for any payment to be sent to the agency.

PCAs can’t take collection actions such as putting a lien on a taxpayer’s property or levying their bank account. However, the IRS can do so even if the account has been assigned to a PCA.

Note: Complaints about PCA employee misconduct (such as requiring an improper payment method or trying to intimidate or harass a client), are made to the Treasury Inspector General for Tax Administration (TIGTA) hotline ((800)-366-4484).

What to do if the call isn’t legit?

If a client or a representative is contacted by someone claiming to work for a PCA but who can’t provide their portion of the Taxpayer Authentication Number, they should hang up and report the scam contact to TIGTA .

For more information about the rules for private collection agencies working for the IRS, see Checkpoint’s Federal Tax Coordinator ¶V-5000.2 .
For information regarding scams linked to private-sector collection agencies, see Checkpoint’s Federal Tax Coordinator ¶ V-5000.4 .