Does the IRS Sell Your Debt? What Taxpayers Should Know

Does the IRS Sell Your Debt to Private Collectors?

Does the IRS sell your debt like a credit card company might? Not exactly. While the IRS doesn’t sell tax debt in the way private lenders do, it does assign certain unpaid accounts to private collection agencies. If you’ve been contacted about a tax bill, it’s essential to know what’s happening and what your rights are.

The IRS Doesn’t “Sell” Debt—But It Does Transfer It

The IRS retains ownership of your tax debt but may enlist the help of third-party collection agencies for certain overdue accounts.

How IRS Debt Differs from Credit Debt

Private creditors often bundle and sell old debts for pennies on the dollar. The IRS, however, never relinquishes control or ownership of your debt. It simply contracts a collection agency to collect on its behalf.

Private Debt Collection Programs

Since 2015, the IRS has legally authorized private collection firms to assist with inactive tax debts. These agencies do not set terms or negotiate settlements—they only facilitate payments already owed.

IRS Oversight Remains Active

Even when a debt is assigned, the IRS remains responsible for the debt itself. That means you still have all the rights and protections afforded under IRS procedures.

Why the IRS Uses Private Debt Collection Agencies

The IRS manages an enormous backlog of unpaid taxes. Assigning older, inactive accounts to contractors helps reduce that burden without additional staffing.

Backlog of Unpaid Accounts

When taxpayers don’t respond to notices and enforcement is unlikely, those accounts may be flagged for referral to a private agency.

Which Accounts Get Transferred?

Only debts not under audit, appeal, or active litigation are eligible. These are often smaller balances or older cases with no recent taxpayer activity.

Timeline Before Assignment

Typically, the IRS has made multiple attempts to collect before assigning your case. You’ll be notified by mail before a private agency gets involved.

What Happens If Your Debt Is Transferred

You won’t be surprised if your account is transferred, because the IRS will notify you in writing.

Watch for the CP40 Notice

This official letter explains the agency involved and confirms the debt assignment. The collection agency will also send its own letter, allowing you to verify legitimacy.

Who Are the IRS-Approved Agencies?

Only a few private firms are authorized by the IRS, including:

• CBE Group
• ConServe
• Performant
• Coast Professional

What These Agencies Can and Can’t Do

They can call you, request payment, and discuss options. But they cannot enforce liens, seize assets, or garnish wages. Only the IRS has the authority to take legal enforcement action.

How to Protect Yourself from Scams and Abuse

Scammers often impersonate IRS agents or debt collectors. Protecting yourself starts with knowing what to expect—and what to avoid.

Verify Every Contact

Never trust a call or letter without checking it against official notices. If you haven’t received a CP40, don’t engage with the caller.

Know Your Rights

You are protected under the Fair Debt Collection Practices Act (FDCPA). This means collectors can’t harass you, call at odd hours, or threaten criminal action.

Respond Smartly

If you’re unsure whether the contact is real, reach out to the IRS directly or work with a licensed tax professional to handle the communication.

IRS Debt Isn’t Sold—But You Still Need to Act

So, does the IRS sell your debt? No. But when your account is handed to a private collector, it’s still a serious matter. The longer you wait, the more penalties and interest you may face. Whether you’re contacted by the IRS or a contractor, you have options—but only if you take action.

Talk to a Tax Expert if You’ve Been Contacted About IRS Debt

If you’ve been approached by a private collection agency about a tax bill, contact us today. A licensed tax professional can help you verify the notice, communicate on your behalf, and explore IRS programs to reduce or resolve your debt legally and safely.

Frequently Asked Questions (FAQs)

1. Does the IRS sell your debt to private companies?

No, the IRS assigns your debt to agencies but retains ownership and oversight.

2. How do I know if my debt was transferred?

You’ll receive a CP40 letter from the IRS and a follow-up letter from the assigned agency.

3. Can I refuse to work with the collection agency?

Yes. You can request in writing to work directly with the IRS instead.

4. What happens if I ignore the collector?

The debt will remain unpaid, and the IRS may resume enforcement if the agency is unsuccessful.

5. Can I settle IRS debt after it’s been transferred?

Settlements like Offers in Compromise must be handled directly with the IRS—not with the collector.

Key Takeaways

• Does the IRS sell your debt? No—it assigns it while maintaining full control.
• Private collectors work on behalf of the IRS, not instead of it.
• You’ll be officially notified before a collector contacts you.
• Scams are common—always verify before sharing any information.
• Taking action quickly can reduce stress, penalties, and interest.