What is the Collection Due Process?
Collection Due Process Hearings
Prior to the IRS issuing a levy, it must give the taxpayer a final notice of intent to levy. If the IRS files a tax lien, the IRS must give the taxpayer a notice after the tax lien has been filed. The notices give the taxpayer 30-days to request a collection due process (CDP) hearing. If a timely CDP hearing is requested, all collection action is suspended until the CDP is resolved. We will discuss here the CDP request when a notice of intent to levy is sent to the taxpayer.
A taxpayer who does not request a CDP hearing within the 30-day period is not entitled to a CDP hearing but is entitled to an equivalent hearing with Appeals. An equivalent hearing does not give the taxpayer the right to go to Tax Court if not successful with Appeals. The taxpayer is allowed one year in which to file for an equivalent hearing. The important distinction between a CDP hearing and an equivalent hearing with Appeals is that the taxpayer may judicially appeal a determination from a timely CDP hearing, while a taxpayer may not appeal a decision from an equivalent hearing.
The Restructuring and Reform Act added Section 6330 to provide that no levy may be made on any property or right to property of a taxpayer unless the IRS sends the taxpayer a Notice of Intent to Levy at least 30 days before the levy is made. This gives the taxpayer a 30-day window in which to request a CDP hearing before any levy will occur, and the CDP Notice must contain a statement to this effect. The Notice may be given in person, left at the taxpayer’s dwelling or usual place of business, or sent to the taxpayer’s last known address by certified or registered mail. This notification is given by Letter 1058 – Final Notice of Intent to Levy and Notice of Your Right to a Hearing.
Filing for the CDP hearing within the 30-day period is mandatory. It cannot be extended. Failure to file within this period will mean the taxpayer loses the right to go to Tax Court if the taxpayer is not successful at Appeals.
Procedures for Requesting a CDP Hearing
A taxpayer is entitled to one CDP hearing with respect to the tax and tax period covered. The taxpayer must request such a hearing in writing within the period discussed above. This is done on Form 12153.
Form 12153, Request for a Collection Due Process Hearing, is included with the CDP Notice sent to the taxpayer. This is the form the taxpayer needs to timely file for the CDP hearing. The Form requests the following information:
The taxpayer’s name, address, daytime telephone number, and taxpayer identification number (SSN or TIN).
- The type of tax involved.
- The tax period at issue.
- A statement that the taxpayer requests a hearing with Appeals concerning the proposed collection activity.
- The reason or reasons why the taxpayer disagrees with the proposed collection action.
The Regulations provide that the written request for a CDP hearing should be sent to the IRS office and address as directed on the Notice.
Conduct of CDP Hearing
The hearing can take place by telephone, correspondence, or in person.
Notice of Determination Issued by Appeals
If the issue is not resolved at Appeals, the Notice of Determination is issued. The determination letter is addressed to the taxpayer, and gives a summary of the determination made by Appeals, and advises the taxpayer of the court to which an appeal may be taken. A Notice of Determination must state whether the IRS met the requirements of any applicable law or administrative procedure:
- resolve any issues appropriately raised by the taxpayer relating to the unpaid tax;
- include a decision on any appropriate spousal defenses raised by the taxpayer;
- include a decision on any challenges made by the taxpayer to the appropriateness; of the collection action
- respond to any offers by the taxpayer for collection alternatives;
- address whether the proposed collection action represents a balance between the need for the efficient collection of taxes and the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary;
- set forth any agreements that Appeals reached with the taxpayer, any relief given the taxpayer, and any actions the taxpayer or the IRS are required to take; and
- advise the taxpayer of the taxpayer’s right to seek judicial review within 30 days of the date of the Notice of Determination.
There is much more to be considered when a taxpayer owes taxes and receives a final notice of intent to levy or a notice that a tax lien has been filed. In most cases when the taxpayer receives a final notice of intent to levy, a CDP hearing should be requested as it gives the taxpayer a chance to resolve the tax issue.
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