irs collection due process

Understanding Your Collection Due Process (CDP) Rights

If you have an outstanding tax debt and you’re facing collection actions, you may want to consider a collection due process (CDP) appeal. A CDP appeal offers you an opportunity to pause IRS collections and speak directly with an IRS settlement officer. These officers have significant power and can approve a resolution that normal IRS employees would never be able to approve.

However, the CDP appeals process can be intimidating and confusing for many taxpayers. If you’re considering a CDP appeal or are currently facing liens and levies from the IRS, read this article to learn more about your rights and the appeals process.

What Is a CDP Hearing?

A collection due process hearing offers you an opportunity to call “time out” and propose a deal to the IRS instead of facing enforced collection. Congress created the CDP process with the Internal Revenue Service Restructuring and Reform Act of 1998 (’98 Act).

Before the ’98 Act, there were almost no limits to the IRS’ powers to collect tax liabilities. The IRS could garnish paychecks, seize bank accounts, and file various other liens and levies with few restrictions.

Today, thanks to the ’98 Act, you have two available types of appeals, depending on whether you’re appealing a lien or a levy. (A lien is a legal claim against your property to satisfy a tax debt. A levy comes after a lien and takes away the property that was subject to the lien.)

  • In a CDP lien appeal, you can challenge a lien by requesting an appeal within 30 days of receiving notice of federal tax lien.
  • The IRS can’t levy against you until 30 days after it has sent a final notice of intent to levy. During that time, you can request a CDP levy appeal; the IRS cannot levy against you until a final determination is made on that appeal.

Understanding Equivalent Hearings

In either case, if you miss the 30-day window, you’re not out of options. You can still request an equivalent hearing up to one year after the CDP notice. An equivalent hearing has three main differences from a regular CDP hearing:

  1. You can’t go to the U.S. Tax Court and appeal the IRS’ decision in an equivalent hearing.
  2. The collection statute of limitations will not pause during an equivalent hearing like it will during a CDP levy appeal.
  3. The law prohibits the IRS law from levying against you while a CDP levy appeal is pending. However, the agency can levy while a CDP lien appeal or an equivalent hearing is pending.

What Does the CDP Appeal Process Look Like?

Usually, the process for a CDP appeal (or an equivalent hearing) takes between 3 and 12 months to resolve. To request a CDP hearing, you’ll need to file a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with the assigned revenue officer (or, if you don’t have an assigned revenue officer, the IRS Service Center that issued the final notice). After you request your CDP appeal, you’ll need to:

  1. Complete a Collection Information Statement (IRS Form 433-F). This form will ask for your monthly income and expenses as well as the value of any assets you have, such as bank accounts, real estate, stocks, and so on.
  2. Create a proposed alternative to enforced collection for the IRS appeals officer to consider. Generally, this alternative will take one of three forms: A payment plan, an offer in compromise, or a request for currently not collectible (CNC) status.

Eventually, you’ll meet and speak directly with an IRS appeals officer. As we mentioned earlier, these officers enjoy a high degree of flexibility and independence compared to most IRS agents. Appeals officers can approve resolutions that other agents could not.

RELATED: Have Tax Issues? Know Your Taxpayer Rights

Need Help With a CDP Appeal or Other Tax Issue? Contact S.H. Block Tax Services

If you have any questions or concerns about an outstanding tax debt or any other tax matters, please contact the experienced tax lawyers at S.H. Block Tax Services. Our skilled attorneys have experience working with the IRS to resolve tax issues and protect taxpayers’ rights.

Schedule your free consultation today by calling 410-793-1231 or completing the brief contact form on this page.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.

 

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