Collection Due Process Hearing
Collection due process (CDP) hearings ensure that the Internal Revenue Service follows a set of procedures put into place to protect the rights of taxpayers facing IRS levies and liens. Requesting a CDP lets you pause IRS collection activities while you work with a settlement officer to assess whether the IRS’s proposed collection actions are appropriate.
The CDP is a procedural safeguard that was created by Congress in the Internal Revenue Service Revenue and Restructuring Act of 1998 to protect against abuses of taxpayer property rights. Those statutory rights have been supplemented by U.S. Treasury Department regulations that set out the procedures that the IRS must follow.
What is a Collection Due Process Hearing?
The IRS restructuring act added Section 6320 of the U.S. Tax Code. It gives you the right to request a hearing when the IRS has filed a tax lien against you or has issued you a notice that it intends to file a levy. A federal tax lien is a legal claim against your property made to secure the payment of a tax debt. A tax levy is the seizure of your property to satisfy a tax debt.
A CDP hearing allows taxpayers and their representatives the opportunity to present collection alternatives to the settlement officer that include installment agreements, proposing an offer in compromise that would settle the issue for less than you currently owe, or requesting currently not collectible status.
What Are The Benefits of a CDP Hearing?
Filing a request for a CDP hearing forces the IRS to suspend its collection efforts against you. Suspending IRS collection efforts gives you the time to gather the documentation you need to offer an alternative for collecting the tax due if you believe that an offer in compromise would benefit the IRS more than simply seizing your assets.
A CDP hearing also allows you to bypass the IRS’s more aggressive Collection Division and pursue an independent administrative appeal from a settlement officer who has not previously been involved in your case. CDP determinations can be appealed to the U.S. Tax Court if you believe the officer abused his or her discretion when deciding your case.
IRS Hearing Request
When Can a CDP Hearing Be Requested?
You can seek a CDP hearing when you have received notice of a tax lien or intent to levy and want to do one of the following:
- Seek an alternative collection method, like a payment plan
- Challenge the rejection of a proposed repayment plan by a revenue officer
- Claim the innocent spouse defense
- Argue for a reduction of interest and penalties
- Argue against the filing of a lien
How Do You Request a CDP Hearing?
If you are requesting a CDP hearing you must do so by filing a Form 1253, Request for a Collection Due Process or Equivalent Hearing, with the IRS. You will use the same form regardless of whether your request is related to a notice of federal tax lien or a notice of intent to levy.
The request must include the reasons you disagree with the IRS’s filing of a lien or levy and documentation supporting your case. Because the IRS will only give you one hearing for each taxable period at issue, you must include any arguments or defenses that you will raise for each taxable period.
What is the Timeframe for Requesting a CDP Hearing?
The timeframe for requesting a CDP hearing depends on whether you received a notice of federal tax lien or proposed levy action. For a notice of federal tax lien the request must be made during the 30-day period beginning the day after the five-business-day period following the filing of the notice. For levy actions, you will have 30 days from the date of the final notice of intent to levy was issued.
The Collection Due Process Hearing
What Happens in the Period Until the Hearing?
If you file a request for a CDP hearing, the IRS is prohibited from taking any collection actions during the period when the hearing and appeals are ongoing.
Who Will Conduct the Hearing?
The CDP hearing is conducted by a settlement officer who works for the IRS Independent Office of Appeals. The appeals office is separate from the IRS’s examination and collection functions and helps resolve tax controversies in a fair and impartial basis that benefits both the taxpayers and the government without resorting to litigation. It also seeks to improve voluntary compliance with the U.S. tax laws by increasing taxpayer confidence in the IRS.
What Can I Expect During the Hearing?
A CDP hearing can be conducted as a face-to-face meeting with the settlement officer, through written communications, or both. If you are claiming financial hardship or requesting a collection alternative, you will need to provide supporting documentation. You do not have the right to call witnesses during the hearing.
During the CDP hearing you may raise any issues relevant to the unpaid tax, including offering collection alternatives and challenges to the appropriateness of the notice of federal tax lien. You may also challenge the amount of underlying tax liability if you did not receive notice of the deficiency and were not otherwise given the opportunity to dispute your tax liability.
If you have participated in an earlier CDP hearing, you cannot raise any issues that were presented at that hearing.
What Will Happen After the Hearing?
You will be notified of the CDP hearing results when you receive a notice of determination from the settlement officer. The notice decides your case based on the merits of the arguments you raised during the hearing and sets out the terms of any agreements you reached with the IRS.
If you disagree with the notice of determination you can file a petition to have it reviewed by an independent Tax Court judge for abuse of discretion. This means that the judge must find the settlement officer accurately analyzed the facts of the case and that he or she followed all applicable laws and IRS guidelines. If the judge finds an abuse of discretion, the case will be sent back to the IRS for further review.
Contact Us for Collection Due Process Hearing Help
If the IRS has notified you of its intent to file a lien against you or levy your property and you think that asking for a CDP hearing could provide assistance, contact the experienced Los Angeles tax attorneys at the Hillhurst Tax Group for help. Our skilled attorneys will assist in determining whether seeking a CDP hearing could be beneficial and ensure that you get the best possible results. Contact our offices today to schedule a free consultation.