IRS Notice CP40: What It Is and What to Do
IRS Notice CP40 is a notice that the IRS sends to taxpayers to inform them that it has assigned their overdue tax account to a private collection agency.
Here is a redacted Notice CP40 that the IRS sent one of our clients.
Table of Contents
IRS Notice CP40 At a Glance
| Notice Type: | Account Assignment |
| Generated By: | IRS IMF |
| Preceded By: | N/A |
| Followed By: | N/A |
| Recommended Action: | Discuss Balance With Collection Agency or Request For Account to Be Sent Back to IRS |
IRS Notice CP40 Explained, Part by Part
Here is a full explanation of the Notice CP40, part by part.
Part 1: Notification of Account Assignment
At the top of the first page of Notice CP40, the IRS informs you in bold letters that your overdue tax account has been assigned to a private collection agency.
Part 2: What You Need to Know
Next, the IRS informs you of two things:
- That the law requires the IRS to send certain accounts to a qualified private collection agency
- The particular private collection agency that the IRS has assigned your account to, along with its mailing address and telephone number
The table below shows the three private collection agencies that the IRS sends some overdue accounts to.
| Name | Address | Phone |
|---|---|---|
| CBE Group Inc. | P.O. Box 2217, Waterloo, IA 50704 | (800) 910-5837 |
| Coast Professional, Inc. | P.O. Box 425, Geneseo, NY 14454 | (888) 928-0510 |
| ConServe | P.O. Box 307, Fairport, NY 14450 | (844) 853-4875 |
Part 3: What You Can Do (According to the IRS)
Next, the IRS informs you of what it wants you to think are your only two options:
- To work with the private collection agency
- To pay your balance due immediately, either online at irs.gov/payments or by mail
However, there are more options than this.
Despite the language used by the IRS in this section of the CP40 Notice, you can still qualify for other tax relief options such as:
However, in order to do so, you will have to request that the private collection agency send your account back to the IRS to be dealt with there.
There’s an additional option you can do as well: nothing. The private collection agencies don’t actually have the levy power that the IRS does — they are, in all essence, all bark and no bite.
Part 4: Payment Options
Next, the IRS provides some additional information, such as:
- The official IRS webpage for the private debt collection program
- The official IRS webpage for the CP40 Notice
- The webpage for Publication 4518, which describes what you can expect when the IRS assigns your account to a private debt collection agency
- The webpage for Publication 1, which describes your rights as a taxpayer
- Where to obtain tax forms, instructions, and publications
- An IRS phone number you can call to discuss this issue
Part 5: Taxpayer Rights and Sources for Assistance
Next, the IRS informs you that the Internal Revenue Code (“the tax code”) gives taxpayers specific rights, and these rights are summarized into ten fundamental rights in the Taxpayer Bill of Rights, which may be accessed at irs.gov/taxpayer-bill-of-rights.
Part 6: Taxpayer Advocate Service and Low-Income Taxpayer Clinics
The final part of this notice gives details on some of the resources available to those taxpayers in need of assistance with their case.
The Taxpayer Advocate Service (TAS) is one option for qualifying taxpayers who are suffering financially due to their tax bill, or otherwise having difficulty in resolving their tax debt issues.
This section also notes that tax professionals who are independent of the IRS can also assist you – that’s where we come in.
There’s also a note here on Low Income Taxpayer Clinics (LITCs) which can be a useful resource for those needing representation before the IRS, as well as those who speak English as a second language.
The IRS includes information on how to find a LITC near you both online and over the phone.
Why the IRS Sends Notice CP40
The IRS sends Notice CP40 to inform you that it is transferred your account to one of the three private debt collection agencies that the IRS is authorized to work with.
What You Should Do If You Receive a Notice CP40
If you’ve received Notice CP40, here is what you should do (step by step).
Step 1: Determine if you should simply do nothing.
Sometimes, the right answer when you receive Notice CP40 is to do nothing.
Remember, these private collection agencies cannot do anything to you; they cannot levy you; they cannot garnish your wages; all they can do is urge you to pay, though they are required to be courteous to you and respect your rights as a taxpayer.
And the IRS’s collection statute still runs while your case is with a private collection agency.
So it may make sense for you to simply “sit tight” while your account is with the private collection agency.
That said, it’s possible that at some point in the future the IRS may retrieve your case from the private collection agency and work it “in house” again.
So, on the other hand, if you qualify for something like an offer in compromise, it may make sense for you to simply deal with your tax debt issues now.
Step 2: If not, request that your account be transferred back to the IRS.
If in fact you want to enter into some resolution with the IRS — such as an installment agreement, currently not collectible (CNC) status, offer in compromise, etc. — you will need to request that the private debt collection agency return your account to the IRS.
You can do this by simply calling them and asking them to do so.
Step 3: Correct any errors with the IRS.
If you do find an error in the IRS’s math, take it up with them.
There should be phone numbers in the CP40 Notice itself that you can call to discuss your disagreement with the IRS’s numbers.
You can always reach out to us at at 866-8000-TAX to go to bat against the IRS for you.
Step 4: Seek Penalty Abatement.
For most of our clients with penalties on their account, we at least seek some sort of penalty relief for them.
Sometimes the IRS grants it; sometimes they don’t.
But it’s generally at least worth a shot.
For more information about seeking abatement for the penalties on your account, check out this article.
Step 5: Pay the Balance Due OR Seek Tax Relief
Finally, you have to figure out what to do with the amount you owe the IRS after you’ve cleared up any disagreements with them concerning the amount as well as obtained any possible penalty relief for your account.
You can, of course, pay off your balance in full. This will (obviously) stop future penalties and interest from accruing.
However, a better option — if you qualify for it — is an offer in compromise. An offer in compromise is an agreement you make with the IRS in which the IRS agrees to accept a lower amount to satisfy your tax debt than you actually owe.
That said, not all taxpayers qualify for an offer in compromise, so there are other options, such as a temporary hardship placement called currently not collectible status as well as installment agreements for taxpayers who wish to pay their balance over time.
For an overview of how tax relief works, read our article What Is Tax Relief and How Does It Work?.
Author:
Logan Allec, CPA, Founder and Owner
Logan Allec has been serving taxpayers as a CPA for over 14 years. After leaving his role at a "Big 4" firm, he started Choice Tax Relief to help everyday Americans who have found themselves behind on their taxes. He also educates thousands of people daily about tax relief on his YouTube channel. In addition to his CPA license, Logan also has a Master's Degree in Taxation from the University of Southern California (USC). He lives with his wife and children in the Los Angeles area. Learn more about Logan here.
