A CDP Hearing Lets You Protest Collections and Request Options
It’s a big deal if you receive a letter or notice from the IRS stating the agency wants to place a tax lien or levy on your property. A tax lien is a legal interest the IRS gets in your property to help satisfy a tax debt. A tax levy is the seizure of property to pay a tax debt.
As you might imagine, tax liens and levies can disrupt your daily life and finances. Therefore, the IRS has special procedures in place to give you the chance to challenge the validity of either tax collection method. One of the most useful procedures is the IRS collection due process (CDP) hearing.
Why Request a Collection Due Process Hearing?
As stated earlier, the primary reason for requesting a collection due process (CDP) hearing is to prevent an IRS tax levy or lien. These hearings are relatively informal and offered through the IRS Independent Office of Appeals. CDP hearings can occur in person or over the phone, though telephone conference hearings are more common.
One of the benefits of having a CDP hearing is to get an IRS employee (often a settlement officer) with no prior involvement in your case to examine your tax issue. This “fresh set of eyes” can sometimes make a positive difference in how the IRS continues its collection activities with you.
During the CDP hearing, you’ll most likely make one or two arguments. The first argument relates to whether you should pay all or part of the tax debt. For example, you might contest the penalties that were added to your overall tax bill, or you might claim you already paid this particular tax debt, but the IRS didn’t apply your payments properly.
The second argument concedes your tax liability and instead focuses on how or if you should pay your tax balance. This usually means outlining payment arrangements, such as an installment agreement, stating you cannot repay the debt and requesting currently not collectible status, or asking for a lump sum settlement (an offer in compromise).
Another reason to request a CDP hearing is to use it to apply for a doubt-as-to-liability offer in compromise (OIC). Applying for this type of OIC along with a CDP hearing can offer slightly improved chances of success because you can appeal the CDP hearing decision to the U.S. Tax Court if the IRS denies your OIC request. No such appeal rights exist when applying for an OIC by itself.
Requesting an OIC based on doubt as to liability requires a strong understanding of tax law. Add the fact that there’s the additional legal strategy of when to request an OIC, and it’s easy to understand why hiring a tax professional well-versed in the tax code is sometimes a good idea.
When to Request a Collection Due Process Hearing
You should know it’s time to request a collection due process hearing when you receive a notice or letter from the IRS concerning a lien or levy, and the document mentions your right to request a CDP hearing. Unfortunately, it’s not always clear from the IRS letter or notice when you should file this request.
This can be a major problem because you only have 30 days from the date of the notice to request a CDP hearing. If you make your request after this deadline, you can still get what’s called an “equivalent hearing,” but it has several drawbacks that we’ll touch on later in this blog.
There are a variety of letters and notices the IRS sends out that will start the 30-day window to request a collection due process hearing, but two of the most common are Letter 1058 (also known as an LT11 notice) and Letter 3172 (also known as a Notice of Federal Tax Lien).
How to Request a Collection Due Process Hearing
What you need to do to request a CDP hearing depends on the reasons you want the hearing. At a minimum, you must submit IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing. The form itself is fairly basic as far as IRS forms go, but you need to be aware that you may need to include additional information along with it.
For example, if you believe the tax lien or levy should be removed or withdrawn because you’re an innocent spouse, then you’ll have to also complete Form 8857, Request for Innocent Spouse Relief. There may also be subtle and/or complicated factual and legal arguments that you need to make. Hiring a tax professional can to guide you through this process can ensure you are making the best case for yourself.
After completing Form 12153 and gathering any additional forms or documents, you can mail your request to the IRS address listed on whatever lien or levy notice the IRS sent you. If there’s no address given or you aren’t sure which address to use, there should be a telephone number on the IRS notice that you can call to obtain the address. Alternatively, you can call 1-800-829-1040 to get this address.
You can also fax your CDP hearing request, but you’ll have to call the IRS at either of the above-referenced telephone numbers to get the appropriate fax number.
Difference Between a CDP Hearing and an Equivalent Hearing
A collection due process and equivalent hearing are the same in that you can negotiate payment alternatives and assert the same arguments. Yet, there are two main disadvantages to equivalent hearings.
The first disadvantage is that an equivalent hearing doesn’t pause the IRS levy. On the other hand, if you request a CDP hearing, the IRS will temporarily stop any attempts to collect your tax debt with a levy.
The second disadvantage is that if you disagree with the results from an equivalent hearing, the decision is final. However, if you disagree with how your CDP hearing turned out, you can ask the U.S. Tax Court to review the CDP hearing decision.
While you almost always want a CDP hearing and not an equivalent hearing, two small benefits come with equivalent hearings. First, during the equivalent hearing process, the 10-year statute of limitations for IRS tax collections will continue to run. In contrast, it pauses during the CDP hearing process.
Second, you have a lot more time to request an equivalent hearing (which can also be requested with Form 12153). Instead of the 30-day deadline you get with a CDP hearing, you have one year (if requesting one relating to a tax levy) or one year plus five business days (if requesting one relating to a tax lien) to request an equivalent hearing.
What Happens After Requesting a CDP Hearing?
After you request a CDP hearing, the IRS worker assigned to your collection case may choose to continue trying to resolve your tax matter with you. You can continue communicating with this person for up to 90 days, or you can tell them to stop trying to collect the tax debt immediately and instead forward your case to the IRS Independent Office of Appeals for further processing.
The Decision from the Collection Due Process Hearing
After the CDP hearing, the settlement or appeals officer who handled the hearing will hand down a decision called a Notice of Determination. If you had an equivalent hearing, you would receive a decision letter instead.
What if I Disagree with the Notice of Determination?
If you disagree with the decision made during your CDP hearing, you have 30 days to appeal the Notice of Determination to the U.S. Tax Court.
Need Help With an IRS Collection Due Process Hearing?
IRS tax liens and levies can have a dramatic financial effect on your life. If you’re losing sleep over the thought of the IRS levying your bank account, garnishing your wages, or placing a lien on your home and property, then contact the experienced tax attorneys at Wiggam Law today.
Our team is here to take the burden of tax issues off your shoulders and deal with the IRS on your behalf. We focus on providing our clients peace of mind while our expert tax attorneys work towards the best possible resolution for your case.
Don’t wait to get help. Call us today at (404) 233-9800 or fill out our online form to schedule a consultation today.