You open a letter from a company you have never heard of, in a city you have never visited, telling you that the IRS handed your overdue tax account to them. A few days later a stranger calls about your federal tax debt and starts talking payment options. Your first instinct — that this is a scam — is exactly right to have, because phone scammers impersonate IRS agents every day and demand immediate payment. But here is the uncomfortable twist: this particular call might be legitimate. Federal law requires the IRS to assign certain old, inactive tax debts to private collection agencies, and three specific companies are authorized to call you right now.
That dual reality is what makes this program dangerous to navigate on vibes alone. Ignore a legitimate assignment and interest and penalties keep compounding while the IRS keeps its lien and levy powers in reserve. Trust a scammer and you wire money to a criminal. This guide walks through how the program actually works, the two letters you must receive before any call, what the collector can and cannot do, and the verification steps that separate a real private collector from a fraud.
Why the IRS Handed Your Account to a Private Company
Congress passed a law requiring the IRS to use private collection agencies for certain overdue accounts — the agency does not get to choose whether to participate. The accounts it assigns are ones the IRS itself is not actively working: older, overdue balances that have been sitting in inventory, often because the IRS lacked the resources to pursue them or could not locate you.
Specifically, your account lands with a private collector when one of three things is true. The IRS lacked the resources to work your case or could not find you. A full year has passed with no interaction between you (or your representative) and the IRS about the account. Or more than two years have passed since the tax was assessed and the account was never assigned for collection. In plain terms, these are debts that went quiet — and the assignment is the IRS breaking the silence through a contractor.
That history matters for your mindset. You are not dealing with a fresh bill where a quick phone call clears things up. You are dealing with an old balance that has been accruing penalties and interest for years, possibly across multiple tax years, and the first order of business is verifying exactly what you owe before agreeing to anything.
The Two Letters You Must Receive Before Any Phone Call
The single most important procedural protection in this program is the paper trail. Before a private collection agency is allowed to call you, two letters must arrive.
First, the IRS itself sends you a Notice CP40 (business accounts receive a CP140) along with Publication 4518, which explains what the assignment means. This letter verifies that your case was transferred and names the specific agency now handling it. Both the IRS notice and the agency's later letter carry a Taxpayer Authentication Number — the same number on both — which the agency uses to verify your identity and which you can use to confirm the agency is who it claims to be. Keep both letters somewhere safe; you will need that number.
Second, the private agency sends its own initial contact letter confirming the assignment and explaining how to resolve the debt. Only after that letter goes out may the agency call you. A phone call about IRS private collection that arrives with no preceding letters is, by definition, not following the legal process — treat it as a scam until proven otherwise.
You can independently confirm the assignment without trusting either letter. Request your account transcript through the IRS Get Transcript tool or your IRS online account: an assigned account shows transaction code 971 entries for the referral to a private agency and the issuance of the CP40 notice. If those entries are absent, the caller has explaining to do.
The Three Agencies Allowed to Call You
Since September 2021, exactly three private collection agencies hold IRS contracts, and any legitimate private-collection contact comes from one of them:
- CBE Group, Waterloo, Iowa — 800-910-5837
- Coast Professional, Inc., Geneseo, New York — 888-928-0510
- ConServe, Fairport, New York — 844-853-4875
Memorize nothing; just know the list is short and public on IRS.gov. A caller claiming to collect IRS debt on behalf of any other company name is not part of this program. Note that scammers can spoof caller ID and recite real company names, so the name matching is a necessary check, not a sufficient one — the authentication numbers and transcript entries are what actually close the loop.
One more boundary worth knowing: if you have a representative with a power of attorney on file, the IRS notifies your representative too, and the agency's dealings should run through that representation. If you hire a tax professional after assignment, make sure the authorization is filed so you stop getting direct calls you would rather your representative handle.
What the Collector Can and Cannot Do
A private collector's powers are narrow by design, and knowing the boundaries is how you spot both overreach and fraud.
A private collection agency will identify itself as an IRS contractor collecting taxes, send the initial contact letter before calling, and help set up and monitor a payment arrangement that pays your balance in full within seven years or by the collection expiration date, whichever comes first. Its employees must follow the Fair Debt Collection Practices Act and respect your taxpayer rights.
A private collection agency will not — and this list is the important one:
- Ask for payment made directly to them. Every dollar goes to the IRS, never to the agency. Checks are payable to the United States Treasury and mailed to the IRS, and electronic payments go through IRS channels.
- Ask for payment by prepaid debit card, gift card, or iTunes card. This is the hallmark of the impersonation scam. No legitimate collector in this program will ever request it.
- Collect your financial information. Unlike an IRS revenue officer working an installment agreement or offer, the agency does not take your detailed financial statement.
- Take enforcement action. It cannot issue a levy or file a Notice of Federal Tax Lien. Only the IRS holds those powers, and the IRS retains them while your account is assigned.
- Decide an offer in compromise or currently-not-collectible status. If you need those forms of relief, the agency cannot grant them — you must work with the IRS directly.
- Charge a fee for setting up a payment agreement. The arrangement is free to establish.
The enforcement point deserves emphasis because it cuts both ways. The collector on the phone cannot seize your bank account or garnish your wages, so threats to do so on the spot are a scam tell. But the underlying IRS account absolutely can still go to lien or levy through normal IRS channels, so "they can't touch me" is not a strategy — it is a misunderstanding that lets the balance grow.
How to Verify the Caller Is Legitimate
Work through this checklist before discussing payment with anyone who calls about IRS private collection:
- Confirm you received both letters. IRS Notice CP40 (or CP140 for a business) plus Publication 4518, then the agency's initial contact letter. No letters, no conversation.
- Match the Taxpayer Authentication Numbers. The number on the IRS notice and the number on the agency letter must agree, and the caller should be able to work with that number. Keep both letters for reference on every call.
- Check your transcript. Look for the code 971 entries showing referral to a private agency and CP40 issuance. This is your independent source of truth that does not depend on trusting the caller.
- Call the IRS directly. If anything feels off, hang up and call the IRS at 800-829-1040 to confirm the assignment and the agency's identity. A legitimate collector expects this; a scammer will pressure you to stay on the line.
- Watch for the red flags. Demands for immediate payment, payment to the agency itself, gift cards or wire transfers, threats of arrest or deportation, requests for detailed financial information, or refusal to let you verify independently — each one alone ends the conversation.
Common mistake to avoid: paying first and verifying later because the caller sounded professional and knew your balance. Scammers buy or steal enough personal data to sound convincing, and a real balance figure is not proof of legitimacy. Verification takes one transcript check or one phone call to the IRS, and no lawful payment arrangement evaporates because you took a day to confirm it.
Your Options for Resolving the Debt
Once the assignment checks out, you have several paths, and the private collector is only one of them.
Pay the IRS directly. Nothing requires you to pay through the collector's process. You can use IRS Direct Pay from a bank account at no cost, the Electronic Federal Tax Payment System, a debit or credit card through an authorized processor for a fee, or a check or money order payable to the United States Treasury with your name, Social Security number, and tax year written on it. The collector can also arrange preauthorized direct debit, where it drafts checks on your behalf — always payable to the United States Treasury — which you can change or cancel up to one business day before a scheduled payment.
Set up a payment arrangement through the agency. The collector can establish a plan that pays the balance in full within seven years or by the collection expiration date. This works well for straightforward pay-over-time situations where you simply need a schedule.
Opt out in writing and work with the IRS instead. If you do not want to deal with the private agency at all, submit that request to the agency in writing. You still owe the debt and the IRS still collects it — you are just choosing to work with the IRS directly rather than through the contractor.
Go to the IRS for relief the agency cannot offer. Offers in compromise, currently-not-collectible status, appeals, innocent spouse relief, and penalty abatement all live with the IRS, not the contractor. If you cannot full-pay within the agency's window, talk to the IRS about these options rather than agreeing to a payment plan you cannot sustain.
Two compliance notes that trip people up. First, check whether you even belong in the program: accounts are excluded when the taxpayer is deceased, under 18, in a combat zone, a victim of tax-related identity theft, receiving SSI or SSDI, at or below 200 percent of the poverty level, under examination or litigation, subject to a pending or active offer or installment agreement, exercising appeal rights, classified as an innocent spouse case, or seeking relief in a presidentially declared disaster. If any exclusion fits you, raise it — the account should be recalled. Second, whatever path you choose, stay current on new tax obligations. A fresh unpaid balance can default your arrangement and restart the worst parts of this process, which is why adjusting withholding or estimated payments now is part of resolving old debt, not a separate chore.
If cost is the barrier to getting help, start with the free options: Low Income Taxpayer Clinics listed in Publication 4134, the Taxpayer Advocate Service, and the IRS directory of credentialed preparers. Professional help with an old multi-year balance is often the highest-return money you will spend in this process.
Keep Your Tax Payments Organized From Day One
Resolving an assigned tax debt is really two jobs: settling the old balance and proving every payment landed where it should. Keep your CP40 notice, the agency's letters, your authentication number, and confirmation of each payment together, and reconcile them against your IRS account transcript every few months until the balance hits zero. Taxpayers who lose track of which year a payment was applied to — or who fall behind on current estimated taxes while paying off old ones — end up back in collections through sheer disorganization rather than inability to pay.
That is a bookkeeping problem as much as a tax problem. Beancount.io offers plain-text accounting that gives you complete transparency and control over your financial data — track payment-plan outflows, estimated tax payments, and year-by-year balances in one version-controlled ledger instead of a drawer of letters. Get started for free and make your next encounter with the IRS a paperwork exercise instead of a scavenger hunt.
