Tax Debt Collection Agency: What to Know and How to Respond

Tax Debt Collection Agency: Your Rights and Next Steps

A tax debt collection agency may contact you if the IRS has transferred your unpaid tax debt to a private firm. While the IRS still oversees the process, these private collectors follow specific rules and limitations. Knowing how these agencies operate—and what your rights are—can help you avoid unnecessary stress and prevent financial missteps.

Why the IRS Uses Private Collection Agencies

The IRS occasionally turns over old or inactive tax debts to third-party collection agencies. This usually happens when a taxpayer hasn’t responded to previous IRS notices or hasn’t made payments for an extended period.

Who Gets Referred?

Not everyone is assigned to a tax debt collection agency. The IRS selects accounts that are inactive, not under audit or appeal, and not currently being handled by a revenue officer.

Authorized Collection Agencies

Only a few companies are approved by the IRS to collect tax debt. As of 2025, some of these include:

• CBE Group
• ConServe
• Performant
• Coast Professional

Confirming Legitimacy

Before discussing your finances, ask the caller for a unique Taxpayer Authentication Number or refer to your IRS CP40 notice—official confirmation that your case was assigned.

What a Tax Debt Collection Agency Can and Can’t Do

Private tax debt collectors must follow the Fair Debt Collection Practices Act (FDCPA) and additional IRS rules.

What They Can Do

• Request payment for your tax debt
• Explain IRS-approved payment options
• Ask you to confirm certain personal information for identification

What They Can’t Do

• Threaten you with jail time or property seizure
• Harass or call at inappropriate hours
• Demand payment via gift cards or money transfer apps

If you experience any of the above, you’re likely dealing with a scam.

How to Protect Yourself from Scams

Scammers often pretend to be IRS collectors to pressure people into paying fake debts. Protect yourself by staying informed.

Verify IRS Authorization

Always check for an IRS CP40 notice before accepting a call. Ask the caller for their name, badge number, and agency name, and verify it on the IRS website.

Guard Your Personal Information

Never give out your full Social Security number, banking details, or debit card information to anyone who calls unsolicited.

Report Suspicious Contacts

If you believe someone is impersonating a tax debt collection agency, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) or the Federal Trade Commission (FTC).

What to Do If You Can’t Pay the Full Amount

If you truly owe the tax debt but cannot pay in full, there are legitimate IRS options available.

Installment Agreements

You may be eligible to set up a monthly payment plan with the IRS, which can be done online or with assistance from the collector. Learn more about your options for IRS installment agreements.

Offer in Compromise (OIC)

This lets you settle your tax debt for less than the full amount if you demonstrate financial hardship. However, this must be arranged directly with the IRS—not through a collection agency. You can explore the requirements for an Offer in Compromise to determine if you may qualify.

Work with the IRS

You can always request the IRS take your case back from the agency, especially if you prefer working directly with the IRS or believe there’s been a mistake.

Take Control When a Tax Debt Collection Agency Contacts You

Don’t panic if a tax debt collection agency contacts you—but don’t ignore it either. Take time to verify the legitimacy of the contact, understand your rights, and consider your repayment options. With the right information, you can navigate the process safely and protect your finances.

Talk to a Tax Professional Before Speaking with a Collector

If you’re unsure how to respond to a tax debt collection agency, contact us to speak with a licensed tax professional. We’ll help you understand whether the contact is legitimate, explain your options, and work with you to resolve the situation with confidence.

Frequently Asked Questions (FAQs)

1. Why did the IRS assign my case to a collection agency?

Because your account was inactive and not currently under audit, appeal, or in IRS collections.

2. How do I know if a tax debt collector is legitimate?

You should receive a CP40 notice from the IRS and can verify the collector on the IRS website.

3. Can a collection agency garnish my wages?

No. Only the IRS, not private collectors—can issue wage garnishments or levies.

4. What are my rights when dealing with tax debt collectors?

You have the right to fair treatment, privacy, and the ability to dispute the debt if needed.

5. Can I request the IRS take my case back from the agency?

Yes. If you prefer to work directly with the IRS, you can make that request in writing.

Key Takeaways

• The IRS uses approved tax debt collection agencies for inactive accounts.
• You have the right to verify legitimacy and challenge the debt.
• Private collectors can’t enforce levies or threaten you.
• Never give sensitive info over the phone unless fully verified.
• Professional help can protect your rights and offer real solutions.