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
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