IRS Notice CP40: Account Assignment to Private Collection Agency
The IRS sends Notice CP40 when it assigns your tax account to a private collection agency. This notice includes Publication 4518 (What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency). It also outlines payment options.
Here's what you need to know if you've received this notice. Or use TaxCure to find help from a local tax pro right now. Note that in some cases, the IRS sends notice CP140 when it assigns your account to a private debt collector. There are very few, if any, differences between these two notices.
What to do if you receive CP40
Make sure that you keep the notice. It includes a number that the collection agency uses to verify your identity. The two-party verification number is the taxpayer authentication number on the top right of the notice.
If you receive this notice, you can contact the collection agency and make arrangements to pay your tax bill. Alternatively, you can pay your tax debt in full or request a payment plan on the IRS's website. If you don't do anything, the collection agency will contact you.
How to pay your tax debt
- Installment agreement — If you owe less than $50,000 and can pay off your tax liability in six years or before the collection statute expiration date (whichever comes first), you can set up a monthly payment plan online. If you owe more or can't pay in this time frame, you will need to complete additional paperwork, but the IRS may still let you set up a payment plan.
- Offer in compromise — If you cannot afford to pay the full tax debt, the IRS may agree to settle for less than you owe. This program requires a lengthy application, and the IRS only approves about a third of requests. For best results, you should work with a professional.
- Partial payment installment agreement — This program lets you make monthly payments on a settlement. If you qualify, you make monthly payments until the collection statute expires, and then, the IRS doesn't require you to repay the remaining balance. However, if your financial situation improves while you're making payments, the IRS may demand the balance in full.
You can contact the collection agency directly to talk about payment options. Keep in mind that you will not make payments directly to the collection agency. They will just explain to you how to pay the IRS.
What if you disagree with CP40
You have a few different options if you disagree with this notice. The steps you should take vary based on why you disagree. Here is an overview:
You already paid the bill.
The IRS suggests contacting the collection agency directly. Make sure that you have your payment details. The employee will use that information to look for the payment.
You don't want to deal with a collection agency.
You are not obligated to deal with a private debt collector. If you prefer to have the IRS handle your account, make your request in writing to the collection agency. You can verbally ban the collection agency from calling your cell phone or your place of employment.
You disagree with the tax liability.
Generally, by the time you receive Notice CP40, you should have received numerous notices from the IRS about your tax bill. The previous notices should have outlined your rights to appeal.
However, if you were unaware of the tax liability until now, you may still be able to appeal or apply for relief through an Offer in Compromise based on doubt as to liability. To learn more, reach out to a local tax professional or contact the IRS directly.
Why did the IRS turn over your account to a collection agency?
Typically, the IRS only sends inactive accounts to third-party collection agencies. This includes situations where the IRS employee assigned to the account has not been able to reach the taxpayer for over a year.
The IRS does not send accounts to collection agencies if the taxpayer is deceased, a minor, in a combat zone, or in a disaster zone. It also should not refer taxpayers that have set up or applied for payment plans, offers in compromise, or innocent spouse relief. Finally, if your account is under examination, criminal investigation, or subject to a right of appeal, the IRS also shouldn't send it to a collection agency.
If you receive CP40 and any of these situations apply, contact the IRS directly or reach out to a tax pro. Then, explain why your account should not have been assigned to a collection agency.
How to tell if this is a real IRS notice
Unfortunately, scammers love to pretend that they are the IRS, and they try to trick people into paying them money. Worried that this notice might not be real? Wondering if the private collection agency contacting you is real? If so, here's what you need to do:
- Make sure the notice mentions one of the private collection agencies used by the IRS. As of 2021, the IRS only uses CBE Group Inc, Coast Professional, Inc, and ConServe.
- Verify your taxpayer authentication number. To verify your identity, you can give the private collection agency the first five numbers from the notice. Then, they should give you the next five numbers.
- Contact the IRS directly. The IRS will be able to verify if your account was turned over to a collection agency.
Don't ever make payment directly to a collection agency. Instead, make sure your payments are to the Department of the Treasury. Also, be aware that the IRS doesn't request payments by gift cards or wire transfers, but scammers frequently use these methods.
How to learn more about IRS Notice CP40
The IRS has a resource page about this notice at www.IRS.gov/cp40. You can also learn more by checking out the Taxpayer Advocate Service (TAS) website: https://www.taxpayeradvocate.irs.gov/notices/notice-cp40/.
Get Help With IRS Notice CP40
If you've received CP40, you should get help from a local tax professional. A local CPA, tax attorney, or enrolled agent can help you make arrangements for your overdue tax account. They can deal with private collection agencies and the IRS on your behalf.
Don't wait until the IRS starts issuing tax liens, seizing your assets, or taking other collection actions against you. Instead, use TaxCure to find a professional focused on resolving tax debt today.