By law, the IRS may attempt to collect taxes up to 10 years from the date of their assessment. During these ten years, many things may occur as the IRS tries to collect while a taxpayer tries to pay or find some other solution. Taxpayers are not without rights in this situation and there are a few ways they may suspend the ten-year collection period. One way, and potentially useful option to resolve tax debt, is a Collection Due Process Hearing (CDP).
The IRS may eventually encumber or levy property as collection tools. Before it levies property, the IRS must send a taxpayer a Notice of Intent to Levy and Right to Request a Hearing. Thus, when the IRS plans on levying property, not only does it give notice of its intent to do so, but it informs a taxpayer that he or she has the right to a hearing, specifically, a Collection Due Process Hearing.
In fact, taxpayers may request a Collection Due Process hearing if they receive any of the following notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing
- 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
- Notice of Levy and of Your Right to a Hearing
The purpose of a CDP hearing is to have the IRS Office of Appeals review any collection actions that were taken or proposed. If the decision by the IRS Office of Appeals is unfavorable, then taxpayers may appeal this determination.
The IRS will inform a taxpayer of the day by which they must request a Collection Due Process hearing. For proposed levies, this date is 30 days from the date of the notice letter. Taxpayers must timely file their request to preserve their right to judicial review of the Office of Appeals’ decision resulting from the Collection Due Process hearing. If a taxpayer’s request for a Collection Due Process hearing is not timely, an Equivalent Hearing may be requested within one year from the date of the notice, but taxpayers may not further challenge a decision.
During the period that a Collection Due Process hearing is pending, the 10-year period for collecting taxes is suspended and the IRS is generally prohibited from seizing or levying a taxpayer’s property to satisfy a tax debt if seizing property is the subject of the hearing. Federal law permits the IRS to seize property during an Equivalent Hearing or a Collection Due Process hearing about the filing of a Notice of Federal Tax Lien but normally will not seize property during these hearings. During the time an Equivalent Hearing is pending, the 10-year period for collecting taxes is not suspended.
Taxpayers are not entitled to more than one Collection Due Process lien hearing and one levy hearing for each tax period or assessment.
All issues should be raised, and all necessary supporting information presented to the IRS Office of Appeals at the hearing. Taxpayers may propose collection alternatives, such as entering into an installment agreement or an offer-in-compromise. Taxpayers should be prepared to submit financial information or tax returns to qualify for and substantiate any collection alternatives.
As mentioned, the CDP Hearing is a taxpayer’s opportunity to request an installment agreement, an Offer in Compromise, or any other available collection option. This is also the appropriate time for a taxpayer to request to be treated as an innocent spouse and dispute the amount of the tax liability if these issues have not already been raised.
This is crucial because taxpayers are prevented from raising issues during a judicial review that were not properly raised at the Collection Due Process hearing. A conference appealing the decision may be held by telephone, correspondence, or, if a taxpayer qualifies, in a personal meeting at the Appeals office closest to a taxpayer’s home or business.
When the IRS commences collection activities to recover unpaid tax debt, an experienced tax professional can help assert and protect the rights of taxpayers. IF you’ve been contacted by the IRS about an outstanding tax debt, call The Gartzman Law Firm at (770) 939-7710.