Private debt collection: when the IRS assigns an account to a private agency

The law: mandatory assignment

The FAST Act of 2015 turned private collection from an option into a mandate. IRC 6306(c)(1) now says “the Secretary shall enter into one or more qualified tax collection contracts for the collection of all outstanding inactive tax receivables.” Under 6306(b), a qualified contract covers locating and contacting taxpayers, requesting full payment, offering an installment agreement “providing for full payment of such amount during a period not to exceed 7 years,” and obtaining specified financial information.

The statute also lets a contractor “obtain financial information specified by the Secretary with respect to such taxpayer” (6306(b)(1)(C)), although the IRS FAQ says the current agencies do not collect financial information, and it bars subcontractors from having contacts with taxpayers or composing collection notices (6306(b)(3)). Contractors are bound by the same prohibitions as IRS employees (6306(b)(2)) and by the Fair Debt Collection Practices Act except where the Code supersedes it (6306(g)). The IRS may keep up to 25 percent of collections to pay the contractors and another 25 percent for a special compliance personnel program (6306(e)); “The amount credited as paid by any taxpayer shall be determined without regard to this subsection.” And “The United States shall not be liable for any act or omission of any person performing services under a qualified tax collection contract” (6306(f)); damages for unauthorized collection actions by contractors are addressed in IRC 7433A.

Which accounts are assigned

An inactive tax receivable is an assessed balance in potentially collectible inventory that meets one of three tests in IRC 6306(c)(2) (repeated in IRM 5.1.12.18.1):

• At any time after assessment, the IRS removed it from active inventory for lack of resources or inability to locate the taxpayer.
• More than 2 years have passed since assessment and it has not been assigned to any IRS employee.
• It was assigned, but more than 365 days have passed without interaction with the taxpayer or a third party to further collection.

The tests point to accounts removed from active inventory or left unassigned. IRM 5.16.1.2 notes that the private debt collection program uses TC 530 closing codes 37 and 38 to shelve cases. IRM 5.19.1.5.20.3 (rev. 02-02-2021) restates the four criteria for ACS employees and adds that under IRC 6306 the IRS “has the discretion to enter into qualified tax collection contracts for other inactive tax receivables as appropriate.” Once a taxpayer is with an agency, later balances follow quickly: IRM 5.19.1.5.20.4 says “A new module with a balance due will be assigned to PDC, three weeks after the first notice.” A client whose older years are with an agency should expect a newly filed balance-due return to land there too unless it is paid or an exclusion applies.

Excluded accounts and taxpayers

IRC 6306(d), expanded by the Taxpayer First Act, bars assignment of these receivables. IRM 5.1.12.18.2 says cases meeting an exclusion are systemically blocked, and an exclusion that arises after assignment may lead to recall.

Taxpayers in a federally declared disaster area may request relief from immediate collection by a contractor and return of the account to the IRS (IRC 6306(i)). If a low-income or SSDI client was assigned anyway, that is a ground to ask for recall.

How assignment is communicated

Two letters come before any call. IRM 5.1.12.18.3: the IRS sends Notice CP40 (individuals) or CP140 (businesses) with Publication 4518, then “The private collection agency will send an initial contact letter of their own.” The IRS FAQ adds that the agency “will not contact you by telephone before sending you the confirmation.” Both letters carry a taxpayer authentication number, used to confirm the taxpayer's identity and to verify the caller.

The agencies under contract since September 23, 2021 are listed on the IRS private debt collection page:

Assignment also shows on the account transcript as a TC 971 entry, “Collection referred to a private debt collection agency”, alongside a TC 971 for the CP40 (IRS FAQ). Practitioners can confirm assignment through the Transcript Delivery System before engaging with a caller.

Publication 594 (Rev. 1-2026) adds that the IRS notice names the assigned agency with its address and phone number and provides a unique ten-digit taxpayer authentication number, and that the agency will work the account only after authenticating the taxpayer with that number. Pub 594 also says the IRS contracts require agencies to provide quality service and equitable treatment. Keep both letters in the client file; the number is how the agency and the practitioner confirm they are discussing the same account.

What agencies can and cannot do

That list is from the IRS FAQ. It means anything other than full payment or a full-pay plan within seven years requires the IRS: a partial payment agreement, an offer in compromise, CNC status, penalty abatement or a liability dispute. The IRS FAQ is explicit on enforcement: “Private collection agencies cannot take any type of enforcement action against you to collect your debt.” The IRS itself keeps that authority while the account is with a contractor.

Payments

“Make all payments to the IRS.” The FAQ continues: “The PCA will never ask you to pay them directly or through prepaid debit, iTunes or gift cards.” Payment methods are the usual IRS channels: Direct Pay, EFTPS, card through an IRS-authorized processor, or a check payable to the United States Treasury. Agencies can also arrange preauthorized direct debit, with checks always payable to the United States Treasury. If the client has already paid, the FAQ says to give the agency the payment details so it can be credited.

Reading the account: codes, payment arrangements and IRS contacts

IRM 5.19.1.5.20.2.1 (rev. 12-05-2025) lists what an account assigned to an agency looks like on IDRS, which is the fastest way to confirm an assignment or a recall from a transcript or an IRS contact:

On the two letters, IRM 5.19.1.5.20.1 explains the authentication number's purpose: “Both of these letters to the taxpayer will contain the unique 10-digit identifier, instead of the taxpayer’s SSN. This unique identifier will be used to conduct a two-party verification between the taxpayer and the PCA.” The IRS sends the CP40 or CP140 to the representative as well as the taxpayer, and the agency's confirmation letter also goes to both. Once a recall or return code is posted or pending, the IRS treats the account as its own again: “If the above TCs are present on an account (either posted or pending), it is no longer assigned to PDC. Do not advise these taxpayers to contact the PCA.”

Agency payment arrangements are not installment agreements in the IDRS sense, but they are coded like one. IRM 5.19.1.5.20.6: “Although PAs granted by PCAs do not show up in ST 60, a TC 971 AC 063 will be present for all modules included in a PCA granted PA.” The agency monitors the payments, the IRS processes them, and the account stays assigned. IRS employees are told not to disturb an arrangement a client is keeping: “You may receive contact from a taxpayer where they state they are working with the PCA. When this occurs, do not take actions to interfere with the taxpayer’s PA with their PCA.” Because a TC 971 AC 063 posts, an agency arrangement that is being paid also satisfies the installment agreement exclusion from passport certification under IRM 5.19.25.4.

What happens when the client calls the IRS instead of the agency. IRM 5.19.1.5.20.4 (rev. 03-03-2025) gives ACS and Field Assistance a short script. A taxpayer who wants to full pay is given the payoff and IRS payment options. A taxpayer who wants to pay over time is told: “Advise the taxpayer they must work directly with the PCA and provide the PCA phone number.” A taxpayer who disputes the liability gets the normal correct-liability procedures but is still sent to the agency for the remaining balance while the account is assigned. A taxpayer who does not want to work with the agency is told to submit a written request to the agency. Threats, suspected scams or complaints about the agency go to the TIGTA Office of Investigations hotline (1-800-366-4484), and a caller naming a company that is not one of the three contractors is told not to pay it and to report it to TIGTA. If the client also owes on modules that are not assigned (a business account, or a spouse's separate balance), ACS will work those separately, and any installment agreement on them is set up as a manually monitored agreement that excludes the TIN assigned to the agency.

Getting the account back to the IRS

A practitioner who needs an IRS-only resolution has three routes:

1. Taxpayer request. “At any time, taxpayers may request their account be returned to the IRS after assignment to a PCA.” The request goes to the assigned agency, in writing; IRM 5.1.12.18.5 cites the FDCPA requirement that a cease-contact request be sent in writing directly to the debt collector.
2. Exclusion. If an exclusion applies (for example, SSDI income, AGI at or below 200 percent of poverty, bankruptcy, identity theft, or a disaster area), ask for the account to be recalled on that basis.
3. Revenue officer recall. When a related entity's case is with a revenue officer, IRM 5.1.12.18.6 lets the officer request recall with group manager approval if the taxpayer is not working with the agency or the field case cannot be resolved without it. A returned account shows TC 971 AC 459 followed by TC 972 AC 054.

Recall is systemic once the account qualifies. IRM 5.19.1.5.20.5 says the account “will be systemically recalled when the account goes to ST 12 or meets one of the PDC exclusions”, and if a written cease-contact request reaches an IRS campus instead of the agency, the campus forwards it to the private debt collection mailbox rather than acting on it, so send the letter to the agency's address and keep proof of delivery. A pending offer or installment agreement is itself an exclusion under IRC 6306(d)(1), and IRM 5.1.12.18.2 says an exclusion that arises after assignment may lead to recall. Revenue officers are told they “should not solicit a taxpayer to submit a written ‘cease contact’ request”, and IRM 5.1.12.18.3 says “IRS field collection employees may not contact the PCA directly.” Questions go through an internal mailbox.

Once back at the IRS, the full menu applies: installment agreements, PPIAs, offers and CNC. Assignment does not change the CSED; IRC 6306 does not list assignment as a suspension event.

Questions practitioners ask