What to Do If You Receive IRS CP40 Notice

Your Tax Account Has Been Assigned to a Private Collection Agency If you have an unpaid IRS tax debt, you may receive Notice CP40, Account Assigned to Private Collections. This means that the IRS has assigned your account to a private collection agency. At 20/20 Tax Resolution, we do not recommend working with private collection agencies. If your account is assigned to a private collector, you can request to have it sent back to the IRS. However, to protect yourself, you should reach out to a tax professional. Contact 20/20 Tax Resolution for expert assistance with your business tax issue.

Key Takeaways:

• CP40 – The IRS sends Notice CP40 when it assigns your unpaid tax balance to a private collection agency.
• What to expect – The agency can help you set up payment or resolution options, but can’t take enforcement actions like liens and levies.
• How to verify the agency – The CP40 notice includes a 10-digit taxpayer authentication number for verification.
• Tax debt resolution options – If you can pay in full, do it right away. You also have options like applying for a payment plan, offer in compromise, or currently not collectible (CNC) status.
• How we can help – Working with tax experts like 20/20 Tax Resolution can help you understand your options, avoid enforcement actions, and negotiate better outcomes with the IRS.

Why You Received IRS Notice CP40

If you receive IRS Notice CP40, your business has outstanding tax debt. Debt could build when you underpay your taxes, miss a tax deadline, or are unable to afford your payment. The IRS takes action right away when a taxpayer isn’t compliant with tax obligations, including:

• Sending initial notices about missed tax returns or payment deadlines
• Summarizing the outstanding balance
• Charging penalties and interest related to noncompliance

If you don’t respond to these initial bills and summaries, the IRS will start to take more aggressive actions, including:

• Taking future tax refunds to cover outstanding bills
• Filing a federal tax lien
• Seizing your property and financial assets (tax levies)
• Issuing a summons to meet with the IRS
• Revoking your passport or suspending your passport application

The IRS is notorious for long wait times and delays, so the agency will often forward your account to a third party to assist with collections. When this happens, you’ll receive Notice CP40 alerting you that your case is now in the hands of a private agency. The IRS will always notify you before the private agency reaches out to you. Although you can make payments through the collection agency, the team at 20/20 Tax Resolution does not recommend that. Instead, taxpayers should contact the IRS directly or work with a tax resolution professional.

Information on IRS Notice CP40

When you receive a CP40 Notice, the IRS will also send you Publication 4518, What You Can Expect When the IRS Assigns You to a Private Collection Agency, with more information. Printed on your notice will be:

• The name of the private collection agency
• The agency’s contact information (address and phone number)
• A new 10-digit taxpayer authentication number – use this to verify your identity with the collection agency
• How to pay your balance off now

Read through your notice carefully to ensure you understand the details. Remember that when the agency contacts you, you will need that 10-digit number to verify your identity.

Why Does the IRS Work with Private Collection Agencies?

Since 2015, the IRS has been able to send delinquent taxpayer accounts to a private agency for collection assistance. In fact, the IRS’s website states that “the IRS is required by law to contract with private collection agencies to assist in the collection of certain unpaid tax accounts.” This may happen when your account has been inactive for a while or the IRS can’t locate you. However, many taxpayers report that their first notice of an IRS tax debt is a letter from a collection agency. If you have received a CP40 but had no knowledge of the tax debt, contact a tax professional for guidance.

Which Collection Agencies Work With the IRS?

As of 2025, the IRS works with these collection agencies:

• CBE Group
• Coast Professional
• ConServe

If you get a notice that lists another agency, contact the IRS to verify that that agency really works with the IRS. You can also see a list of updated collection agencies on the IRS’s website. Although this list is subject to change, the IRS typically has long-term contracts with these companies.

Private Collection Agencies vs the IRS

So, what’s the difference between working with the IRS and a private collection agency? First, note that these agencies can’t actually take enforcement actions. They can’t file a federal tax lien or issue a levy on your property. The IRS takes these actions. The private agency can accept payments – again, we don’t recommend dealing with collection agencies. However, if you decide to make a payment, it should go to the US Treasury, just like all other IRS payments. If a collector tries to convince you to make a payment to another entity or to pay using an odd type of payment like a gift card, you’re talking to a scam artist.

Reasons You Should Steer Clear of Collection Agencies

Here are some of the reasons you should ask to have your account returned to the IRS, or you should reach out to a tax professional for help:

• Third-party collectors are not tax professionals – Collectors will not be able to answer any questions related to tax codes, incorrect tax liabilities, or even how the IRS assesses interest or penalties.
• Collectors often work on commission – Debt collectors often (but not always) receive commissions for the debts they collect, which tends to contribute to aggressive collection practices.
• Collection agencies cannot offer settlements – If you’re a good candidate for a tax settlement, a collection agency will not be able to answer your questions or help you apply.
• The collection statute expiration date (CSED) may be approaching – Once the CSED hits, the IRS can no longer legally collect the debt. If it’s close to the CSED, you may be better off not paying or making other arrangements with the IRS. However, a collector will not be able to talk you through the options.
• Collectors may not understand the Taxpayer’s Bill of Rights – As a taxpayer, you have rights, which may not be upheld when you’re working with a third party that is not a licensed tax professional and that has not been trained by the IRS.

Debt collectors must abide by the terms of the Fair Debt Collection Practices Act (FDCPA). There are many elements to this act, but at a bare minimum, they must call during reasonable hours, maintain your privacy, and not harass you. If you decide to contact a collector and you feel that they have violated the terms of the FDCPA, you can report them to the Federal Trade Commission or your Secretary of State.

Can You Get Your Account Switched Back to the IRS?

To get your case sent back to the IRS, send a written request to the private agency to let them know that you want to work with the IRS. If you can pay off your debt now, you can just do that right away, and you won’t have to work with the third party. If you already know your options and know what you want to do to resolve your debt, it will make the process easier. It may be a better option to talk to a separate tax professional about your situation, who can help you navigate the resolution process and avoid having to deal with the collection agency.

Steps to Take After Receiving Notice CP40

Getting assigned to a private collection agency doesn’t mean anything has necessarily escalated on your account. It just means that a private agency is collecting your debt instead of the IRS. Here’s what you can do next:

View More Information Online

The IRS outlines what your notice means at www.irs.gov/cp40, so start there. You can also download Publication 4518 to read why the IRS has assigned your account to a private agency and what to do next.

Make Your Payment

You won’t have to work with the third-party agency if you can make your tax payment now. Your notice will include instructions for paying, including through the IRS’s online system or via mail. If you can, pay in full as soon as possible to avoid further collection actions, penalties, and issues with the IRS.

Set up a Payment Plan

You can also set up a payment plan with the IRS to avoid escalating collection actions. Individuals who owe $50,000 or less can set up payments online. Businesses can apply online if they owe $25,000 or less — to set up your online IRS business account, you’ll need your employer identification number (EIN), date your business was established, information on your IRS notice, and tax return information.

Request an Offer in Compromise

An offer in compromise is another option for businesses. These arrangements allow you to send in an offer that you can afford to pay and settle your debt for less. You must show evidence in your financial documentation that you can’t afford the full tax bill and that your offer is all you can pay. The IRS doesn’t accept the majority of these requests and will look through your documents carefully. For best results, consider working with a tax professional.

Request Currently Not Collectible Status

You may have another option to avoid IRS collections: currently not collectible (CNC) status. This is a temporary hold on collections that the IRS agrees to if you show you’re going through financial hardship. You’ll have to show your business’s financial situation using Form 433-B, Collection Information Statement. But remember that this is only a temporary status, and you’ll have to pay once again when your situation changes.

Dispute the Unpaid Taxes

If you don’t agree with the unpaid tax balance the IRS is stating you owe, you also have options for disputing the information. Contact the IRS about the incorrect information you want to dispute. You also have the right to appeal any decision the IRS makes, so read through any instructions on IRS notices about your rights. Talk to a tax professional when you’re not sure how to start the process.

How to Know the Private Collection Agency Is Real

Scammers have historically posed as third-party agencies to try to get confidential taxpayer information. Always be sure you received a notice through the mail, since the IRS won’t text or email you about this. The IRS also has an extra step in place for your protection. In the top right-hand corner of your CP40 Notice, you’ll be assigned a taxpayer authentication number that’s 10 digits. When the private collection agency contacts you, they will ask you for the first five digits of the number, and then they will provide the last five numbers. This helps ensure you are talking to a legitimate agency that the IRS is working with on your outstanding taxes.

When to Work with an Expert at 20/20 Tax Resolution

Anytime you get an IRS notice in the mail, you may be worried they’re coming after your property and assets. If you get Notice CP40, it’s definitely not something to ignore, but it just means the IRS has assigned your outstanding taxes to a private collection agency. You still need to take action right away to avoid further collection actions and penalties.

It’s always a good idea to talk to a tax expert about any tax issue you’re dealing with, so it doesn’t continue to impact your business. At 20/20 Tax Resolution, our team is experienced in representing taxpayers in court, negotiating with the IRS, explaining payment and resolution options, and dealing with tax liens and levies.

Contact 20/20 Tax Resolution today to learn more about how we help businesses get out of tax problems.

Sources:

https://www.irs.gov/pub/irs-pdf/p594.pdf

https://www.irs.gov/individuals/understanding-your-cp40-notice

https://www.irs.gov/pub/irs-pdf/p4518.pdf

https://www.irs.gov/pub/notices/cp40.pdf

https://www.irs.gov/payments/online-payment-agreement-application

https://www.irs.gov/businesses/small-businesses-self-employed/private-debt-collection