Taxpayers Have the Right to Appeal
When the IRS sends out a final collection notice, many people assume that there is no alternative other than to simply arrange for payment of the tax deficiency. However, you do have another option. If you think a mistake has been made, or want to raise a particular issue, you can make a formal appeal of the collection with the IRS Independent Office of Appeals.
As its name implies, the IRS Independent Office of Appeals operates separately from the IRS Collections office. This arrangement ensures that the Collections office does not exercise any kind of influence over the functions of the Office of Appeals.
In fact, the IRS prohibits ex parte communication between the Office of Appeals and the Collections office regarding the accuracy or merits of cases. In other words, there can be no communication between an Appeals employee and employees of other IRS functions without you or your representative being given an opportunity to participate.
As we will see in more detail below, a Collection Due Process (CDP) hearing is one of the main avenues a taxpayer can take to appeal a particular collection action.
How to Request a Collection Due Process Hearing
Taxpayers have the option of submitting a request for a CDP hearing if they receive one of the following IRS Notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
- Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund
- Notice of Levy and Notice of Your Right to a Hearing
To make the request, you will need to complete Form 12153 — Request for a Collection Due Process or Equivalent Hearing — and send it to the address listed on the particular notice you have received.
Completing this form is fairly simple. You need to provide information about yourself, the tax liability that has been assessed, and the precise reason why you would like a hearing. You must give a reason as to why you are disputing the tax liability, otherwise a hearing will not be granted.
Importantly, filing a CDP Hearing request in a timely manner automatically halts all collection efforts until the dispute can be resolved.
How Long Do I Have To Request a CDP Hearing?
If you receive any of the notices listed above, you have 30 days to submit a CDP hearing request. The clock starts running from the date listed on the notice, and the deadline is firm.
After the 30-day clock has expired, you can no longer make a CDP hearing request. The IRS will then begin moving forward with its collection efforts, which can involve bank account freezes, asset seizures, and so forth.
What Happens if I Miss the 30-Day Deadline?
Even if you don’t submit your request within 30 days, you typically have up to a year to request what’s called an Equivalent hearing.
Equivalent hearings work similarly to normal CDP hearings. However, by filing an appeal late and requesting an equivalent hearing, you lose the right to go to Tax Court to litigate the decision, and the IRS retains the right to pursue collections against you.
That being said, the filing of the appeal itself can be extremely useful if you are dealing with a difficult ACS agent or Revenue Officer at the Collections level. The Equivalent hearing still moves the case to Appeals, which can buy you some critical breathing room to come up with funds and allow a fresh set of eyes on the case.
What To Expect During a CDP Hearing Procedure
When you reply to a collection notice with a CDP Hearing request, you will have the option of resolving the dispute directly with the IRS Collections office. If the matter still cannot be resolved, then your case will be sent to the Office of Appeals, and an Appeals officer will schedule a conference to discuss your case. The conference may be conducted via telephone, through correspondence, or in-person.
A variety of topics may be discussed during a CDP Hearing. The specifics of the discussion ultimately depend on the nature of your case. Some possible topics include:
- Whether the taxpayer actually paid the contested debt in full
- Whether the contested debt was assessed while the taxpayer was in bankruptcy
- Whether the statute of limitations has expired
- Whether the IRS made a procedural error or mathematical mistake in its assessment
- Whether the taxpayer intends to claim innocent spouse relief
- Whether the taxpayer wishes to discuss the details of specific collection options
During a CDP hearing, you can request specific action regarding a lien against your property. For example, requesting a lien withdrawal on the premise that the Internal Revenue Service filed the Notice of Federal Tax Lien (Notice 3172) prematurely or did not follow established procedures is appropriate during the hearing.
After the hearing, you will receive a determination letter that includes the outcome of the case. If you still disagree, you can make a petition to have the case reviewed by the U.S. Tax Court. The determination letter from the Office of Appeals will include a deadline by which you must submit your petition. Otherwise, the decision in the determination letter will stand.
This is a lot of information to take in, and going through this ordeal alone likely seems overwhelming. If you need assistance, reach out to Boxelder’s team of licensed tax professionals. We can review your case, file the necessary paperwork, and negotiate directly with the IRS on your behalf.