Tax Dictionary – Private Debt Collection
The IRS began a new private collection program for certain overdue federal tax debts. The new program, authorized under a federal law enacted by Congress, enables designated contractors to collect, on the government’s behalf, outstanding inactive tax receivables.
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In 2017, the IRS began to turn over accounts it’s no longer actively working to private debt collectors. Those accounts include situations in which:
- There’s a lack of resources.
- The IRS can’t locate the taxpayer.
- One year has passed without any IRS collection activity.
- More than one-third of the 10-year statute of limitations has passed, and no IRS employee has been assigned for collection.
The IRS will send a CP40 notice to inform you that your case has been transferred to a private debt collector. The collector will also send you a letter informing you that it has received your case.
The IRS won’t transfer delinquent accounts if you are:
- Under IRS audit
- Under 18
- A victim of tax identity theft
- In currently not collectible status
- In a combat zone or disaster area
- Currently working with appeals
- In an installment agreement
- Appealing a case in U.S. Tax Court
- Being levied
- Waiting on a pending innocent spouse or offer in compromise application
Learn more about form CP89, why you received it, and how to handle an IRS CP89 notice with help from the tax experts at H&R Block.
Get the facts on the IRS tax debt settlement option called an offer in compromise (OIC). Read the IRS definition and get more insight from H&R Block.
Get the facts from H&R Block about the widely available but little-known IRS penalty relief option called first-time penalty abatement.
Learn more about form CP06, why you received it, and how to handle an IRS CP06 notice with help from the tax experts at H&R Block.