Few things create as much anxiety as getting a call or letter from a debt collector. When that debt involves unpaid federal taxes, the fear can multiply fast. The good news is that even when your IRS tax debt is turned over to a private collection agency, you still have legal protections, rights, and workable options to resolve it.

At our firm, we help taxpayers across the country understand how to manage this process, negotiate safely, and regain financial peace of mind. This guide breaks down exactly what happens when your IRS debt is referred to a collection agency, what your rights are, and how to manage the situation effectively.

The IRS sometimes outsources certain unpaid tax debts to approved private collection agencies (PCAs). This happens when the IRS has tried and failed to collect payment for several years. Rather than simply writing it off, the IRS assigns some cases to private contractors to pursue collection under federal supervision.

Currently, the IRS uses a small list of authorized private agencies to perform this work. These companies never buy your debt. They are paid by the IRS to collect it. They must strictly follow all federal collection laws, including the Fair Debt Collection Practices Act (FDCPA) and the Fair Tax Collection Practices Act (FTCPA).

• You may be referred to a PCA if you have unpaid tax balances from prior years
• The IRS hasn’t been able to reach you through traditional means
• Your account isn’t actively being handled by IRS employees or in litigation

The IRS typically waits several years before doing this, giving taxpayers multiple notices beforehand.

Scammers often pose as IRS officials or debt collectors. Before sharing any information, you should confirm that your case has indeed been referred.

• IRS Notification: Before any private collector contacts you, the IRS will send you an official letter explaining the referral and listing the agency’s name.
• Collector’s Introduction Letter: The collection agency will send its own letter confirming the assignment shortly after.
• Verification: Confirm legitimacy by calling the IRS or checking the list of approved agencies on the IRS website.

Important: No real IRS collection agency will ever demand payment via gift cards, cash apps, or cryptocurrency. Legitimate payments go directly to the IRS, never to the collection company itself.

Once your debt has been assigned, the agency will begin contacting you—typically by phone or mail—to discuss resolution options. Their primary goal is to collect what’s owed on behalf of the IRS, usually by setting up a payment plan or requesting full payment.

• Initial phone call: Representative will identify themselves, assert the debt, and discuss resolution.
• Follow-up letters: Written correspondence outlining what you owe and how to proceed.
• Verification requests: You have the right to request written validation of the debt.

Note: Private collection agencies cannot garnish wages, place liens, or take enforcement actions. Only the IRS can do those things.

• Right to Privacy: Collectors can’t discuss your tax situation with anyone but you or your representative.
• Right to Written Communication: You may request all correspondence via mail—this creates a record and adds security.
• Right to Validation: Demand the agency validate the debt in writing.
• Right to Dispute: If info is wrong or not yours, you can file a written dispute.
• Right to Respectful Contact: Agencies are prohibited from illegal hours, deceptive language, or threats.

Your first step after being contacted is to request validation of the debt. The agency must show proof that:

• The IRS assigned your account
• The tax debt is yours
• The balance is accurate

Send this request in writing within 30 days of first contact. While the agency works to validate, it must stop collection activity. Keep copies of all letters and store these records permanently!

• Avoid giving financial info over the phone
• Never admit liability or “acceptance” of the debt verbally
• Request official verification before payments
• Use certified mail to document receipt

Remaining calm and professional helps prevent costly emotional decisions.

• Payment Plans: Propose monthly payments you can afford.
• Offer in Compromise (OIC): If you can’t pay in full, ask the IRS about settling for less.
• Temporary Delay: Qualify for hardship status and temporarily suspend collection.

Never send money directly to the private agency. Always pay the IRS.

• Common reasons: mistaken identity, paid-off balances, identity theft, or added fees
• Collections must pause during investigation
• Invalid debts require written confirmation clearing liability
• After resolution, check your credit report for errors

• Don’t admit responsibility too early
• Don’t ignore letters or calls
• Don’t pay without written agreement
• Don’t send payments to the agency—only to IRS or Treasury
• Keep every document indefinitely

• Check your credit report for accuracy
• Monitor your IRS account online for zero balance
• Review your withholdings or estimated payments
• Consult a tax professional for ongoing compliance

Getting your IRS tax debt referred to a collection agency can feel overwhelming—but it doesn’t mean you’ve lost control. You still have powerful rights, clear options, and opportunities to resolve the debt responsibly. The key is to stay calm, organized, and proactive.

Whether your goal is disputing an inaccurate debt, negotiating manageable payments, or rebuilding your credit afterward, IRSTaxPros can help. Our experts guide you step-by-step through every stage of the tax collection process so you can move forward with clarity and confidence.