Previously, we discussed the IRS Collections Process and learned that the IRS sends a “Notice of Intent to Levy” 30 days before collections activity is set to begin, and that taxpayers have the option of requesting a “Collections Due Process Hearing” during this time. This article will discuss the Collections Due Process Hearing and how taxpayers can use these hearings to defend themselves against improper IRS collections efforts. If you have additional questions or would like to find out how we can help protect your rights when it comes to dealing with IRS Collections, contact us to talk to an IRS Collections Attorney in Reno, NV.
What is a CDP Hearing?
Simply put, a Collection Due Process Hearing (“CDP Hearing”) is a hearing to determine whether an IRS Collections action is proper under the Internal Revenue Code. The hearing is conducted by the IRS Office of Appeals, which is an independent agency within the IRS that exists to resolve disputes between taxpayers and the government. The hearing is held before an IRS Appeals Officer, who is typically a former IRS Revenue Agent with a great deal of knowledge and experience.
Why should I request a Collections Due Process Hearing?
The IRS has very broad collection powers and can easily levy bank accounts and garnish wages. However, taxpayers have certain guaranteed rights under the law that even the IRS must respect. A CDP hearing is one way for taxpayers to enforce these rights against the IRS. In a CDP hearing, the taxpayer can:
- Request an alternative collection method, such as a tax payment plan
- Raise an Innocent Spouse Defense
- Argue for abatement of interest and penalties
- Challenge the underlying tax debt (in some circumstances)
- Argue against the filing of tax lien,
- Challenge the decision by a Revenue Officer to reject your proposed payment plan.
If the taxpayer loses in the CDP hearing, he or she may appeal the outcome to United States Tax Court where the matter will be reviewed and decided by a US Tax Court Judge.
When can I request a Collections Due Process Hearing?
The right to request a collections due process hearing does not last forever. The taxpayer can only file the request with Form 1253 within 30 days after receiving any of the following notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
- Final Notice — 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 Your Right to a Hearing
- Post Levy Collection Due Process (CDP) Notice
After filing the request, all collections activity on your tax debt is put on hold until your hearing is resolved.
What if I don’t file the CDP request in time?
The Collections Due Process hearing is only available for 30 days after notice from the IRS of collections activity (see above). A taxpayer who fails to file a CDP request within this time period must instead request a “Equivalent Hearing” through the IRS Collections Appeals Program (CAP) within one year from the notice.
An equivalency hearing requested through CAP gives the taxpayer an equivalent opportunity to contest the IRS’s proposed collection action. However, there are certain things the taxpayer cannot do in an equivalency hearing, including challenge the underlying tax debt and cannot appeal the hearing’s outcome to US Tax Court. Also, the taxpayer does not receive a hold on collections while the hearing is pending. So, even though the taxpayer can challenge wage garnishments and bank account levies in an equivalent hearing, a CDP hearing is still preferable.
For more information about IRS Garnishments & Levies, please see:
- IRS Collections Process
- IRS Automated Collections (ACS)
- IRS Revenue Officers
- Our Approach to Collections