Receiving an IRS collection notice is very stressful, but taxpayers do have rights to challenge the IRS. In a previous post, we discussed the right to request a Collection Due Process (CDP) Hearing. This remedy can be very useful in many circumstances, but there are other options.
Where the taxpayer fails to file a Collection Due Process Hearing request within the required 30-day time limit, he/she has the right to an “Equivalent Hearing.” The taxpayer must request the hearing within 1 year and 5 business days from the filing date of the Federal Tax Lien or 1 year from the date of the levy notice. A CDP Hearing and Equivalent Hearing are similar in that the same issues may be considered by the IRS in both hearings. However, unlike a CDP Hearing, a taxpayer’s request for the Equivalent Hearing does not act to suspend the proposed levy or collection action by the IRS or suspend the 10-year statute of limitations on collection. IRS policy, however, is to place a hold on collection for all periods included in the Equivalent Hearing, while the Equivalent Hearing is pending.
Upon completion of the Equivalent Hearing, the Appeals Officer issues a “Decision Letter.” In general, taxpayers cannot challenge their Equivalent Hearing Decision Letter in court. However, the taxpayer can appeal the Decision Letter under certain limited circumstances if the issue raised in the hearing itself provides judicial appeal rights.
Note that in certain circumstances, even if a CDP Hearing is an option, it may be better to request an Equivalent Hearing rather than a CDP Hearing.
Collection Appeals Program
In addition to CDP Hearing rights, a taxpayer may request consideration under the IRS’s Collection Appeals Program (CAP). CAP rights are available in the following situations:
- Before or after the IRS files a Notice of Federal Tax Lien;
- Before or after the IRS levies or seizes property;
- Upon termination of an Installment Agreement; or
- Upon rejection of an Installment Agreement.
Prior to invoking appeal rights under this program, the taxpayer must first discuss the issues with the Revenue Officer’s manager and be prepared to suggest a reasonable alternative to the protested action.
If an agreement cannot be reached with the manager, the taxpayer can then file a Form 9423, “Collection Appeal Request.” Thereafter, collection action will usually be suspended while the request is evaluated, but only if Form 9423 is filed within two days of the conference with the manager.
Appeals Officers are expected to close CAP cases within five business days, so conferences are expedited. However, taxpayers are allowed a reasonable delay when justified. The Appeals Officer reviews the case based upon the law, policy, procedures, and facts. If he/she determines that the collection action challenged is consistent with IRS policy and procedure, he/she upholds the action. If the IRS action is upheld, collection may resume.
CAP rights are distinguishable from CDP rights in that the taxpayer can request an expedited review of the IRS’s collection action before it occurs. CAP is also generally quicker and available for a broader range of collection actions. The downside is that decisions under CAP are binding and cannot be appealed in court. Accordingly, a CDP Hearing might be a better option in certain circumstances because the decision can be appealed.
It should be noted that there are risks and benefits with all appeal options. Depending on the particulars of the case, one type of appeal may be better than another. Taxpayers should discuss the alternatives with an experienced tax attorney. In future posts, we will discuss other types of appeals.
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.