If you don’t believe you owe the IRS, call the IRS toll-free at 1-800-829-1040 (or TTY/TDD 1-800-829-4059) for more information or assistance in resolving the debt. See Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree.
If you can pay the amount in full upon receipt of the notice, you can do so electronically at pay your taxes on IRS.gov. You can also sign up to view your account information securely online. Once your federal tax debt is paid in full, then your tax account will be returned to the IRS and closed.
If you can’t pay the full amount, you need to decide which payment option might work for your situation and act to set up a payment plan or discuss other alternatives. Being proactive in addressing the tax debt may prevent additional penalty and interest charges and eliminate the need for the collection agency to contact you. For specifics, see I got a notice from the IRS and Private Debt Collection Frequently Asked Questions.
PCAs cannot take any type of enforcement action against you to collect your debt. However, the IRS does have the legal authority to file a Notice of Federal Tax Lien or issue a levy to collect an overdue account.
If you do not wish to work with your assigned PCA to settle your overdue tax account, you must submit this request in writing to the PCA. (See No Contact Letter.)
If you do speak with the PCA, they can ask if you can full-pay your tax debt within 120 days. If you can’t, the statute allows the PCA to offer you a plan known as an installment agreement under which you may pay your tax debt in full over five years or less. If the PCA obtains IRS approval, it may set up an installment agreement for six or seven years. A PCA may not take collection action (such as filing a lien, levying your bank account, or garnishing your wages), nor may it issue a summons or report your IRS tax debt to the credit rating agencies.
You can call the IRS and explain that you do not want to pay in installments or can’t afford to do so. If you orally advise the PCA you plan to contact the IRS about collection alternatives, the PCA will place a 60-day hold on your account. If you have not reached an agreement with the IRS within those 60 days, the PCA may resume collection activity on your account. Because many actions take longer than 60 days, you may wish to write to the private collection agency to request that it stop contacting you and you no longer wish to work with them. (See No Contact Letter.)