What is a CP140 IRS Notice?
Getting any kind of notice from the Internal Revenue Service (IRS) is nerve-wracking, especially if you don’t understand what you received. If a CP140 notice lands in your mailbox, what are you supposed to do? Well, all IRS notices generally have one thing in common — they mean that you need to take action about your tax account.
A CP140 notice, in particular, lets you know that your tax account has been assigned to a private collection agency. It also informs you what happens next and what actions you’re required to take to move your account forward.
This notice is virtually the same as a CP40 notice. You could receive either one if your tax account goes to third-party collections. Don’t panic yet – even if you get a CP140 notice. This guide explains everything you need to know.
To get help now, use TaxCure to find a local tax pro who can help you deal with your tax debt and ensure that you don't face any adverse collection actions from the IRS or the collection agency.
What Does a CP140 Notice Mean?
A CP140 notice means that the IRS has assigned your tax account to private debt collectors. The IRS contracts out the collection of certain tax accounts that are in the red. That includes accounts that have gone inactive due to the age of the account or a lack of response from the taxpayer.
Getting this notice usually means that over several years, you’ve failed to respond to multiple notices from the IRS about your tax account. You may get a CP140 notice if you’ve failed to file your taxes and the IRS has assessed that you owe them taxes. Or you might get this notice because you defaulted on a payment arrangement or simply failed to pay your taxes in full after filing.
Getting a CP140 notice is a serious sign that you need to take action on your tax account now. Ignoring a private collection agency can lead to more aggressive collection actions.
What’s the Difference Between a CP140 and CP40 Notice?
The truth is, there’s next to no difference between the CP140 and CP40 notices. You may receive either notice. They both carry the same message: Your tax account has been assigned to a debt collector.
What to Do if You Get a CP140 Notice
If you receive a CP140 notice, you should confirm that it's real. Then, you should contact the collection agency to make payment arrangements for your tax debt. If preferred, you still have the right to make payment arrangements directly with the IRS. A tax professional can help you determine the best steps in your situation.
Here's a more detailed look at the steps you should take after you receive this notice:
1. Confirm the Collection Agency Is Contracted With the IRS
Avoid being the victim of a scam by confirming that the collection agency named on the notice is contracted with the IRS. Unfortunately, some scam artists use these types of letters to trick people into calling them, and then they trick the person into giving up payment details or other compromising information.
A legitimate CP140 notice includes the name and contact details of the private collection agency handling your account. The IRS publishes the names of all collection agencies they use for exactly this purpose. Go to the IRS website and search for the keyword “private debt collection,” then confirm that the agency is listed.
The private collection agency will also send you a separate letter confirming that they’ve received your tax account for collection and that they’re being contracted by the IRS. Before you respond, 1) confirm that you’ve received both letters, 2) make sure that the agency listed is the same on both letters and 3) double-check that the IRS lists this agency on its website.
2. Verify the Collection Agency With an Authentication Number.
Both letters will contain a Taxpayer Authentication Number that the collection agency will use to confirm your identity and that you can use to verify that the contact is legitimate. You will provide the collection agency with part of the code, and they will provide you with the other part. If all of the numbers match up, you know that you're talking to a legitimate agency.
3. Make Payments Through the Private Collection Agency.
Talk with the collection agency to make payment arrangements on your account. They can help you process a payment or full or set up monthly payments. They generally cannot help you apply for offers in compromise, innocent spouse relief, or other tax settlement programs.
Keep in mind that the payment will not be made directly to the collection agency. Instead, the collection agency will help you process a check over the phone to the Department of the Treasury. Or they can direct you on how to make a through IRS Direct Pay or the EFTPS system.
4. Request to Have Your Account Returned to the IRS If Desired.
Again, you don't have to work with the collection agency. If you don't feel comfortable, you can work directly with the IRS. If so, let the collector know that you prefer to work with the IRS, and send the collection action your preference in writing. Then, contact the IRS to let them know as well.
5. Know Your Rights
Unfortunately, the debt collection industry is not that ethical. Most collectors work on commission, and they are notorious for twisting the truth to convince someone to pay their bill. Be aware that you need to be careful when dealing with these professionals and brush up on your rights under the Fair Debt Collection Practices Act (FDCPA).
For instance, collectors should not call you before 8 AM or 9 PM. They should not call you at work or on your cell phone if you request them to stop. In most cases, if you send a letter telling them to stop contacting you, they are required to abide by your request. If your rights are being trampled, reach out to a tax attorney for help as soon as you can.
How to Deal With Tax Debt on a CP140 Notice
There are two big reasons you might receive a CP140 notice. Number one — you didn't file a return, and the IRS assessed taxes against you. Or number two — you filed a return but didn't pay. In either case, here's what you need to do.
File Your Back Taxes (If Applicable)
If you received this notice due to an assessment from a year you didn't file a return, you should file your back taxes. Most IRS assessments are much higher than they would be if you actually filed your return. However, there are some exceptions to this rule:
- If the assessed tax seems lower than it would be if you filed, you may want to leave the assessment as is.
- If you're likely to get an offer in compromise that lowers your tax bill to an amount that is lower than the liability you would face if you filed, then you may not want to bother filing.
- If the collection statutes are getting close to the expiration date and the amount wouldn’t be able to be paid before the debt is paid in full.
An experienced tax professional can help you decide if you should file your back taxes. Then, they can help you gather the documents and file the returns.
Arrange to Pay Your Taxes in Full
Depending on your means and the amount you owe, arranging to pay your taxes in full is the ideal option. This way, you can take care of the entire debt in one quick action. Sometimes people even borrow money to pay their taxes — if the rate on the loan is lower than the interest and penalties charged by the IRS, this can save you money in the long run.
Negotiate an Offer in Compromise
If you can’t afford to pay for your tax bill outright but want to deal with it once and for all, you may want to consider an offer in compromise. The private collector cannot authorize an offer. Instead, you'll need to apply to the IRS.
You'll need to share detailed information about your finances to prove that you can't afford to pay in full. Then, if the IRS approves the offer, you will need to pay it in full or in payments over the next 24 months.
Set Up a Payment Arrangement for Your Taxes
If you can’t afford to pay a lump sum to pay off your old tax debt, the collection agency can help you set up a payment arrangement that meets your needs. Be prepared to offer a monthly payment that works for you financially, and be flexible if possible. You may be asked to describe your situation or explain why a payment arrangement is necessary before the agency approves your request.
What Happens if You Ignore a CP140 Notice?
Private collection tactics can be aggressive if you don’t respond to a CP140 notice. If you don’t respond to a CP140 notice immediately, the collection agency will continue to try to get in touch with you. When collectors cannot reach someone, they've been known to call anyone connected to that person in an attempt to get their phone number.
Although the collector can't legally tell the person why they're calling, they often drop clues. And getting a message from a collection agency through your neighbors, relatives, or previous employers can be very embarrassing.
Can Collection Agencies Take Legal Action for IRS Tax Debt?
Private collection companies cannot enforce legal actions (such as lawsuits, wage garnishments, or asset seizures) against you to collect on the tax debt. If they threaten legal action on the phone, let them know that you know they don't have those rights. Then, consider reporting them to the Secretary of State in your state, or reach out to an attorney for advice.
That said, the IRS can file a federal tax lien or levy to collect on your account. So ignoring a CP140 notice can still end in property loss or other grave consequences for you.
How to Avoid Getting a CP140 Notice
There’s a surefire way to avoid getting a CP140 notice, and that’s to pay your tax obligations before they become old enough to transfer to collection agencies. The IRS doesn’t publish exact details on which accounts get outsourced to private collection agencies, so it's hard to figure out if this is likely to happen until you receive the notice.
Navigate Your CP140 Notice With Tax Help
It’s natural to feel uneasy about handling your CP140 notice without the help of a professional – and the good news is, you don’t have to do it alone. Instead, you can get help from a trusted tax guru (or a team of gurus). Using TaxCure, you can search for someone who has experience helping people with these types of tax issues.
Once you have someone in your corner, they can advocate for you and help you get the best outcome possible. Don't wait — get help from the IRS now.
- Understanding Your CP140 Notice | Internal Revenue Service
- Publication 4518 (rev. 11-2019) What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency
- Private Debt Collection | Internal Revenue Service
- Private Debt Collection – Accounts Assigned to Private Collection Agencies | Internal Revenue Service