A Collection Due Process (CDP) hearing is an important option for taxpayers giving them the right to appeal IRS lien and levy actions. The CDP hearing was introduced 20 years ago to protect taxpayers from overreaching by the IRS. It is now used routinely. However, whether or not to request a CDP hearing depends on the taxpayer’s unique situation as well as the actions of the revenue officer assigned to the case. For those considering a CDP hearing, there are 6 things to know:
1. When can a taxpayer request a CDP hearing?
Generally, taxpayers can request a hearing when they receive one of the following notices from the IRS:
- Notice of Federal Tax Lien Filing, Letter 3172 (I.R.C. § 6320);
- Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing, Letter 1058 (I.R.C. § 6331(d));
- Note: Both the Notice of Federal Tax Lien Filing and Notice of Intent to Levy are preceded by a “CP 504 Urgent Notice,” which does not by itself afford CDP rights.
- Notice of Jeopardy Levy and Right of Appeal, Letter 2439;
- Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing, CP 92; or Final Notice Before Levy on Social Security Benefits, CP 298.
2. How is a CDP hearing requested?
To request a CDP hearing, a taxpayer must file with the assigned revenue officer or the IRS Service Center issuing the final notice (if no revenue officer is assigned) a Form 12153, Request for a Collection Due Process or Equivalent Hearing.
Taxpayers must submit appropriate documentation in support of their case with their paperwork. A taxpayer is allowed only one hearing with respect to the taxable period to which the unpaid tax specified in the final notice relates, so it is important that all defenses and arguments are raised in the Form 12153 or a properly filed supplement.
3. How much time does a taxpayer have to file a request for a CDP hearing?
If the taxpayer receives a levy notice, he/she has 30 days to file the CDP Hearing request from the date of the notice. Alternatively, if the taxpayer is mailed a lien notice, the 30-day period to request the CDP Hearing begins 5 days after the filing of the lien notice. The letter usually states the date by which the request for a CDP Hearing must be filed; so, if in doubt, use the date on the letter.
4. What effect does the CDP hearing request have on collection efforts?
While waiting for the Collection Due Process Hearing, the IRS will suspend collection efforts. In addition, a timely request will also suspend the 10-year statute of limitations on collection.
5. Who conducts the actual hearing?
The Collection Due Process Hearing is conducted by a Settlement Officer (SO) who has not previously been involved in the case and thus takes an impartial look at the matter.
Unless the taxpayer protests the appropriateness of the lien or levy, the CDP Hearing will likely focus on whether alternative collection methods are available under the circumstances.
6. What happens after the CDP hearing?
The results of the Collection Due Process Hearing appear in a Notice of Determination prepared by the Appeals Officer, which is sent to the taxpayer. The Notice of Determination must confirm that all procedural requirements were met in the taxpayer’s case and decide the merits of any issues asserted by the taxpayer during the hearing. If the parties reach an agreement regarding any relief or other action to be taken, the Notice of Determination will set forth the terms and conditions of the agreement.
If a taxpayer receives an adverse ruling, he/she has 30 days to appeal the findings in the Notice of Determination with the Tax Court.
CDP hearings provide many benefits to taxpayers, but whether it is the right option for a taxpayer depends on many factors. It is important that taxpayers or their representatives know their CDP rights and preserves their right to appeal to tax court if necessary.
If you have received an IRS Notice of Federal Tax Lien or Notice of Intent to Levy, contact us to discuss how we can help.
In our next post, we will discuss other options for appealing an IRS collection action.