When the IRS Sends Your Debt to a Collection Agency

Yes, the IRS uses private collection agencies, but only under specific conditions and with legal limits on what they can do

The IRS does hire private collection agencies to pursue certain tax debts, but this happens less often than many people fear. The agency uses a program called the Private Collection Agency (PCA) program, which operates under strict federal rules. Not every unpaid tax bill goes to a collection agency — the IRS pursues most debts itself through wage garnishment, bank levies, and liens.

The key difference between IRS collection and private collection agency collection is who contacts you and what methods they can use. A private collection agency working for the IRS cannot sue you, garnish your wages, or place a lien on your property. Those enforcement tools stay with the IRS. The collection agency's job is narrower: to contact you, verify the debt, and try to get you to pay or set up a payment plan.

Key Takeaways

The IRS only sends certain tax debts to private collection agencies, typically older debts that the IRS has already tried to collect itself.
A private collection agency working for the IRS cannot garnish wages, levy bank accounts, or file liens — only the IRS can do those things.
You can request that the IRS pull your debt back from a private collection agency and handle it directly instead.
Any collection agency claiming to represent the IRS must provide you with a Notice of Intent to Refer to a private collection agency before they contact you.
If you receive a call or letter from someone claiming to collect an IRS debt, verify it through IRS.gov or by calling the IRS directly before paying.

Which tax debts get sent to collection agencies

The IRS does not send all unpaid taxes to private collection agencies. The debts that typically go to collection are older, smaller accounts that the IRS has already tried to collect through its own methods. Generally, the IRS refers debts that are between $25,000 and $100,000, though this range can shift. Debts under $25,000 usually stay with the IRS, and debts over $100,000 typically remain with the IRS as well because they warrant direct agency attention.

The IRS also does not refer certain types of debts at all. If you are currently in an IRS payment plan, bankruptcy, or an offer in compromise (a settlement where you pay less than you owe), your debt will not go to a private collection agency. The same applies if you are a victim of identity theft or if the IRS has already filed a Notice of Federal Tax Lien against you.

How you are notified before collection agency contact

Before the IRS sends your debt to a private collection agency, you must receive a Notice of Intent to Refer in the mail. This notice tells you that your debt will be referred to a collection agency within 30 days unless you take action. The notice includes the debt amount, the tax years involved, and instructions for what to do if you want to dispute the debt or request that the IRS keep the case instead.

You have the right to request that the IRS bypass the private collection agency and keep your case. This is called a "bypass request." You can make this request within 30 days of receiving the Notice of Intent to Refer. If you submit a bypass request, the IRS will review it and decide whether to grant it. There is no may provide the IRS will agree, but the option exists.

What a private collection agency can and cannot do

A private collection agency working for the IRS operates under the Fair Debt Collection Practices Act (FDCPA), which limits how they can contact you and what they can say. They cannot call before 8 a.m. or after 9 p.m. in your time zone. They cannot call your workplace if your employer does not allow it. They cannot threaten you, use profanity, or harass you. They must stop contacting you if you send them a written request to cease communication.

What they cannot do is enforce the debt. A private collection agency cannot garnish your wages, levy your bank account, seize your property, or file a lien. Only the IRS has those powers. If a collection agency claims they can do any of these things, they are lying, and you should report them to the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC).

How to verify a collection agency is actually working for the IRS

IRS collection scams are common. Someone calls claiming to represent the IRS or a collection agency and demands immediate payment, often threatening arrest or license revocation. The IRS does not initiate contact by phone for unpaid taxes — they send notices by mail first. If someone calls you claiming to collect an IRS debt, do not give them any information.

Instead, hang up and contact the IRS directly. Call the IRS at 1-800-829-1040 (the main IRS customer service line) or visit IRS.gov and use the "Contact Us" tool. You can also check the IRS website for a list of the private collection agencies currently under contract with the IRS. As of now, the IRS works with a small number of agencies, and their names are public. If the agency calling you is not on that list, it is not an IRS contractor.

What to do if a collection agency contacts you about an IRS debt

If you receive contact from a private collection agency claiming to represent the IRS, first verify the debt through the IRS directly. Do not rely on the collection agency's word. Once you have confirmed the debt is real, you have several options.

You can request a Collection Due Process (CDP) hearing if you have not already had one. This is a formal hearing where you can dispute the debt, propose a payment plan, or request that the IRS keep the case instead of using a collection agency. You must request this hearing within the timeframe specified in the Notice of Intent to Refer.

You can also set up a payment plan directly with the IRS or the collection agency. The collection agency can help arrange this, but the payment plan is with the IRS. If you set up a plan, the collection agency's involvement typically ends, and the IRS takes over the account.

Your right to dispute the debt

If you believe the debt is wrong — because you already paid it, the amount is incorrect, or the debt belongs to someone else — you can dispute it. Send your dispute in writing to the collection agency within 30 days of their first contact. The collection agency must then stop collection efforts while they investigate. They must also verify the debt with the IRS.

You can also dispute the debt directly with the IRS by requesting a CDP hearing. At the hearing, you can present evidence that the debt is incorrect. If the IRS agrees, they will withdraw the referral to the collection agency.

Frequently Asked Questions

Can a private collection agency sue me for an IRS debt?

No. Private collection agencies working for the IRS cannot file lawsuits. Only the IRS can pursue legal action against you for tax debt. If someone claiming to collect an IRS debt threatens to sue you, they are either lying or they are not actually working for the IRS.

What happens if I ignore contact from the collection agency?

The collection agency will continue trying to contact you, but they cannot garnish your wages or levy your bank account. However, the underlying IRS debt remains, and the IRS can still use its own enforcement tools — wage garnishment, bank levies, and liens — whether or not you respond to the collection agency.

Can I get the IRS to take the case back from the collection agency?

Yes, you can request a bypass. If the collection agency has already contacted you, you can still ask the IRS to pull the case back. Send a written request to the collection agency or contact the IRS directly. The IRS will review your request, but approval is not may provide.

How do I know if the person calling me is really from an IRS collection agency?

Hang up and call the IRS directly at 1-800-829-1040. Do not use a phone number the caller provides. The IRS can tell you whether your debt has been referred to a collection agency and which agency it is. You can also check IRS.gov for the current list of IRS contractors.

What should I do if a collection agency is harassing me?

Document the calls or letters and file a complaint with the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov or the Federal Trade Commission (FTC) at reportfraud.ftc.gov. You can also send a written cease-contact letter to the collection agency. They must stop contacting you once they receive it.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.