What Is a Collection Due Process Hearing and Should You Request One?
A collection due process hearing — also known as a CDP hearing — is a simply a conversation you have (or your power of attorney has) with an IRS Appeals Officer regarding your collections case with the IRS.
What Is IRS Appeals?
The IRS Independent Office of Appeals is a separate entity from the IRS Collections department that you were previously dealing with.
When you meet with an IRS Appeals Officer, you have the opportunity to present your case to someone who has not seen it before and is not influenced by your previous interactions with IRS Collections.
The IRS has strict guidelines in place to ensure that its Appeals Officers are not “in cahoots” with anybody in IRS Collections — such as your revenue officer.
They can’t even discuss with them how good or bad they think your case is.
This is why they are called the “Independent” Office of Appeals.
The two major hearings held by IRS Appeals Officers are Collection Due Process (CDP) Hearings and Collection Appeals Program (CAP) Hearings.
During this conversation, you or your representative can discuss with the Appeals Officer why you disagree with the IRS’s collection activity or proposed collection activity — typically the filing of a notice of federal tax lien or the seizure of your assets, also known as a levy — and propose an alternative solution to deal with your tax debt such as:
- An offer in compromise, which is an agreement with the IRS to settle your tax debt for less than you owe
- An installment agreement, which is an agreement with the IRS to pay off all or a portion of your tax debt over time
- A placement into currently not collectible (CNC) status, which is an agreement with the IRS that due to your current financial circumstances you should not have to pay the IRS anything until your financial situation improves
What Is Due Process?
Both the Fifth Amendment and the Fourteenth Amendment to the United States Constitution state that “no person shall be deprived of life, liberty, or property without due process of law.”
And obviously, when the IRS informs you of its intent to levy your property, it is intending to deprive you of your property.
So constitutionally, the IRS cannot do this unless it does so by “due process” of law — that is, according to the procedures set forth in the law and other authority, such as the Treasury Regulations as well as the IRS’s own procedural guidelines.
And the purpose of a Collection Due Process hearing is to ensure that the IRS has followed and is following these procedures correctly before it takes levy action against you.
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When Can You Request a CDP Hearing?
You can request a CDP hearing if you receive one of these five notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
- Final Notice — Notice of Intent to Levy and Notice of Your Right to a Hearing (Such as Notice LT11 or Letter 1058)
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
- Post-Levy Collection Due Process (CDP) Notice
1. Notice of Federal Tax Lien and Your Right to a Hearing Under IRC 6320
The IRS is required to notify you within five business days after it has filed a notice of federal tax lien for the first time for a given year.
You have 30 days after this five-day period to request a CDP hearing; the notice you receive will indicate the deadline.
2. Final Notice — Notice of Intent to Levy and Notice of Your Right to a Hearing
The IRS is required to notify you no less than 30 days before it levies you of its intent to levy and your right to a CDP hearing to protest the levy action.
This notice is typically provided in Notice LT11 from the IRS’s Automated Collection System (ACS) and in Letter 1058 from a revenue officer.
You have 30 days from the date of this notice to request a CDP hearing, and the IRS cannot levy you unless the appeals officer at the CDP hearing determines that the IRS’s proposal to levy you was proper.
3. Notice of Jeopardy Levy and Right of Appeal
Occasionally, the IRS determines that the collection of taxes will be endangered if it conducts the standard procedure of providing the taxpayer with notice of its intent to levy before taking the levy action.
In this case, the IRS may make a jeopardy assessment of taxes and take levy action without previously notifying the taxpayer.
If you are subject to a jeopardy levy, the IRS must send you notice of its levy action after taking it, and you have 30 days from the date of this notice to request a CDP hearing protesting the IRS’s levy action.
4. Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
After sending you Notice CP504 — which does not provide you with your right to a CDP hearing — the IRS may levy your state tax refund.
However, after levying your state tax refund, the IRS must send you notice after doing so, and you have 30 days from the date of this notice to request a CDP hearing.
5. Post-Levy Collection Due Process (CDP) Notice
The IRS does not have to provide federal contractors with the right to a CDP hearing before levying them.
However, after levying a federal contractor, the IRS must send them a post-levy collection due process (CDP) notice describing the levy action, and the federal contractor has 30 days from the date of this notice to request a CDP hearing.
Should I Request a CDP Hearing?
It is typically in your best interest to request a CDP hearing if the IRS’s proposed or actual actions against you will or have caused you financial hardship or if you are actively seeking an alternative resolution to your tax debt — such as an installment agreement or an offer in compromise — such that the IRS taking levy action against you was or would be more intrusive than necessary.
How Do I Request a CDP Hearing?
You request a CDP hearing by filing Form 12153 within 30 days of the notice informing you of your right to a hearing.
Be sure to check the appropriate box on the Form 12153 for the basis of your hearing request — whether your request is to protest the IRS filing a notice of federal tax lien or to protest the IRS’s proposed or actual levy action or both.
On Form 12153, you must also indicate your proposed alternative(s) to, or your reasons for disagreeing with, the IRS’s actions or proposed actions.
Be sure that your reason for submitting your request for a CDP hearing is legitimate and not frivolous — in general, any request for a CDP hearing that is made on a frivolous basis or that is made solely to delay or impede collection will be denied by the IRS.
That said, you shouldn’t shy away from requesting a CDP hearing simply because you don’t want to be levied; Internal Revenue Code 6330 — which provides the statutory basis for CDP hearings — recognizes that a taxpayer may have a “legitimate concern” that the IRS’s collection action is “more intrusive than necessary.”
Our position at Choice Tax Relief is that for our clients — who by virtue of having hired us are clearly pursuing compliance and resolution of their tax debt — IRS levy action is clearly more intrusive than necessary, and our general rule is protest any proposed levy action by the IRS any chance we get.
Note that you can only have one CDP hearing per assessment within a tax period.
What If I Miss My CDP Hearing Deadline?
If you miss your 30-day CDP hearing deadline, you can still request an equivalent hearing by filing Form 12153 — be sure to check the equivalent hearing box — within one year of the date of the notice informing you of your right to a CDP hearing.
Can I Still Work With IRS Collections While My Request Is Being Processed?
Yes, you can still work with IRS Collections after you submit your CDP hearing request.
If you come to an agreement with IRS Collections regarding your case, you can withdraw your request for a CDP hearing.
What Happens After I Submit My Request For a CDP Hearing?
After you submit your request for a CDP hearing, someone from the IRS Independent Office of Appeals will contact you to schedule your hearing.
If you are proposing a collection alternative — such as an installment agreement — to the IRS’s proposed or actual levy, be sure to gather documentation showing why the IRS should accept that collection alternative.
During the period of time between when you submit your timely request for a CDP hearing and during the CDP hearing process, the IRS is statutorily barred from taking levy action against you.
What Happens During my CDP Hearing?
Your CDP hearing may be held by telephone, via the mail, or in person.
During your hearing, you will have the opportunity to communicate to the appeals officer why you disagree with the IRS’s proposed or actual collection action and provide an alternative.
After your hearing, the appeals officer will issue a determination letter indicating their decision regarding your collections matter.
If you don’t agree with the appeals officer’s determination, you can petition the United States Tax Court within the timeframe described in the determination letter.
Note that the Tax Court may limit the issues it is willing to hear to the issues that you raised in your CDP hearing, and the Tax Court may limit the evidence you present to the evidence you submitted to your appeals officer for your CDP hearing.
Therefore, it is in your best interest to raise all issues and present all evidence to your appeals officer in your CDP hearing, not only to give you the “best shot” at an agreeable resolution to your case after the CDP hearing but also for the sake of maximizing your chances at prevailing in Tax Court if your case comes to that.
What If IRS Collections Does Not Abide By the CDP Hearing Determination?
If you believe that IRS Collections is not abiding by the appeals officer’s determination, you may bring up the issue again with the IRS Independent Office of Appeals.
However, you should first try to work through the issue with IRS Collections.
Can I Withdraw My Request For a CDP Hearing?
Yes, you can withdraw your request for a CDP hearing by filing Form 12256.
CDP Hearing vs. Equivalent Hearing
An equivalent hearing is similar to a CDP hearing with some notable differences.
1. Deadline
While the deadline for requesting a CDP hearing is 30 days from the date of the notice informing you of your right to a CDP hearing, the deadline for requesting a CDP hearing is one year after the date of the CDP levy notice (or one year after the end of the five-business-day period after the filing of a notice of federal tax lien).
Note that if you want to request an equivalent hearing, you must indicate this as such on the Form 12153.
2. Effect on Levy Action
If you file a timely request for a CDP hearing, the IRS is statutorily barred by Internal Revenue Code Section 6330 from levying you for the tax periods covered by your CDP hearing request with the following exceptions:
- Jeopardy levy situations
- Levies on state income tax refunds
- Levies served on federal contractors
- Disqualified employment tax levies
However, even if you file a timely request for an equivalent hearing, the IRS is not statutorily barred from levy action against you for the periods indicated on the CDP hearing request.
Note, however, that although not required by statute, the IRS’s internal policy under Internal Revenue Manual Section 5.1.9.3.5.1(2) is to not take levy action against a taxpayer for tax periods for which an equivalent hearing has been requested.
3. Effect on Collection Statute
The IRS’s collection statute is tolled from the date the IRS receives a timely request for a CDP hearing until the date the determination from the appeals officer handling the hearing becomes final, including any litigation.
On the other hand, requesting an equivalent hearing does not toll the collection statute at all.
CDP Hearing vs. CAP Appeal
The Collection Appeals Program (CAP) is another type of appeals avenue available to taxpayers in certain circumstances, but there are key differences between a CDP hearing and a CAP appeal:
1. Availability
A CAP appeal is available in far more instances than a CDP hearing.
While a CDP hearing may only be requested within 30 days of receiving certain notices that specifically give the taxpayer their right to a hearing, a CAP appeal may be requested in any of the following instances:
- Before or after the IRS files a Notice of Federal Tax Lien
- Before or after the IRS levies or seizes your property
- Termination, or proposed termination, of an installment agreement
- Rejection of an installment agreement
- Modification, or proposed modification, of an instalment agreement
2. Speed of Appeals Decision
You’ll typically get a quicker response from Appeals by filing a CAP Appeal than by filing a CDP hearing.
3. Tax Court Rights
While you can file a Tax Court petition if you disagree with the appeals officer’s finding in a CDP hearing, you do not have Tax Court rights to contest the appeals officer’s finding in a CAP appeal.