Since 1998, taxpayers have had an important right available to them to help them protest an IRS collection action and settle a tax debt. They have the right to request a Collection Due Process (CDP) hearing. CDP hearings can provide tremendous benefits, providing a fair and equitable process for both the IRS and taxpayers. They provide an opportunity to discuss the appropriateness of the collection action and whether alternative methods are available. A CDP hearing also provides temporary relief from the IRS collection efforts in most cases, allowing the taxpayer time to resolve the matter voluntarily. However, there are a number of things taxpayers must know in order to take advantage of CDP hearings and not lose their rights.
Notice and Filing
Before the IRS can pursue collection by lien or levy, the IRS must first notify the affected taxpayer in writing of his or her right to a hearing under the Internal Revenue Code (IRC) with an impartial Appeals officer. These notices typically come as a Notice of Federal Tax Lien and Your Right to a Hearing Under I.R.C. 6320 or a Notice of Intent to Levy and Notice of Your Right to a Hearing.
In order to request a CDP hearing, a taxpayer has to 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. This is the only means by which a taxpayer can obtain judicial review of an Appeals’ determination.
Taxpayers must submit appropriate documentation in support of their case with their paperwork. Importantly, 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.
Notice of determination
After a CDP hearing request is assigned to Appeals, the assigned Appeals officer decides whether the proposed collection action may proceed. Pursuant to the IRC, the notice of determination must (A) verify that the requirements of applicable law and administrative procedure have been met, (B) consider relevant issues raised by the taxpayer concerning the collection actions, and (C) whether the proposed collection action balances the need for efficient collection of tax with the taxpayer’s legitimate concern that the collection action be no more intrusive than necessary. The Appeals officer is required to consider appropriate spousal defenses, challenges to the appropriateness of the collection action, and potential collection alternatives such as an installment agreement, an offer in compromise, among others.
The taxpayer may petition the Tax Court for judicial review of the notice of determination.
CDP hearings provide many benefits to taxpayers; however, they have also been the source of taxpayer complaints to Congress. As a result, it is important that taxpayers or their representatives know their CDP rights and preserve 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.