IRS Collection Due Process (CDP) Hearing & Form 12153
Table of Contents
- What is a Collection Due Process Hearing
- When Can Taxpayers Request a CDP Hearing
- Examples of Issues Taxpayers Can Address During CDP Hearing
- Difference Between CDP and CAP (Collection Appeals Program)
- What is a Notice of Federal Tax Lien
- Notice of Intent to Levy Notices With Appeal Rights
- How to File Form 12153
- What Happens After a Taxpayer Requests a CDP Hearing
- What if the Taxpayer Misses the 30-Day Deadline to File a CDP Hearing?
- Where do you Send IRS Form 12153?
CDP Appeal Help
What is a Collection Due Process Hearing
A Collection Due Process Hearing, also known as a CDP hearing, is one taxpayer option to fix a tax controversy with the IRS. The taxpayer has the CDP hearing with the IRS Office of Appeals, which is independent and separate from the IRS Collections office. A taxpayer can leverage this option to protest an IRS collection notice, among other possibilities.
When Can Taxpayers Request a CDP Hearing?
Taxpayers have a right to a CDP hearing when they receive an IRS notice indicating their right to a hearing. The taxpayer must make the request timely to the address shown on the IRS notice.
Generally, before the IRS can issue the taxpayer a levy or after the IRS files a tax lien, they must send them either a Notice of Intent to Levy and Your Right to a Hearing or a Notice of Federal Tax Lien Filing and Your Right to a Hearing. However, the IRS does not have to notify the taxpayer in advance of a tax levy when:
- Collection of the tax is in jeopardy
- The IRS levies a taxpayer’s state refund
- The taxpayer meets the criteria for a Disqualified Employment Tax Levy
- The IRS issues a federal contractor levy
After receiving the notice, generally, the taxpayer has 30 days to request a Collection Due Process hearing to discuss the filing. The IRS uses the postmark date, and the IRS notice indicates the 30-day expiration date. In some cases, the IRS may honor it even if it is a few days late (but don’t count on it). Taxpayers can request a CDP hearing with Form 12153. It’s imperative that taxpayers submit Form 12153 within the 30 days as once you do, the government cannot initiate a levy (exceptions above) until after the hearing or after the U.S. Tax Court appeal (discussed below). The request also tolls the 10-year statute of limitations on collection.
A federal taxpayer can implement their right to a CDP when receiving a:
- Final Notice of Intent to Levy
- Received a Notice of a Federal Tax Lien
- Notice of Jeopardy Levy and Right to Appeal
- IRS Notice of Levy on Your State Tax Refund
- Post Levy Collection Due Process (CDP) Notice
Taxpayers can request one hearing under section 6320 and 6330 for each tax assessment in a tax period. Taxpayers can also leverage a licensed tax attorney, enrolled agent, or CPA to represent them during the hearing.
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Some Examples of Issues Taxpayers Can Address During a CDP Hearing
Taxpayers may address many problems at a CDP hearing. Here are some examples of issues that taxpayers can raise during a CDP hearing:
- Taxpayer believes they paid all the taxes due
- The taxpayer cannot pay their taxes due to:
- Terminal illness or high medical bills
- Unemployment or no income
- Reasonable expenses exceed income
- The fact their only source of income is social security, welfare, or unemployment benefits
- Because reasonable cause exists, the taxpayer believes they should not be responsible for tax penalties
- The taxpayer wants to pursue innocent spouse relief
- Taxpayer thinks the statute of limitations on collection has expired
- When the taxpayer intends to propose a different way to pay the taxes owed
- Whether the IRS made a procedural error in assessment
- Whether the IRS assessed taxes and initiated a levy when the taxpayer was in bankruptcy
- If the taxpayer wants a tax lien discharged to sell a piece of property and use the proceeds to pay off their tax liabilities
- If the taxpayer desires a tax lien subordination or withdrawal
- Taxpayer believes they are not liable for all or part of the taxes owed (no deficiency notice sent) or the taxpayer had no opportunity to dispute the tax liability
What is the Difference Between CDP and CAP (Collection Appeals Program)?
A Collection Due Process (CDP) hearing works to stop the government from serving a levy among other actions (exceptions discussed above). The taxpayer has 30 days to request a CDP hearing (postmark date) after receiving notice from the government of their intentions. If the taxpayer submits Form 12153 timely, the IRS suspends collections until the results of the hearing or until their court case comes to a close (if they petition the court).
If the taxpayer requests a CDP hearing outside of the 30-day window, they are entitled to an Equivalent Hearing with Appeals within one year. However, the same rules do not apply as the CDP hearing. If the taxpayer disagrees with the appeals decision, they do not have a right to judicial review by the Tax Court.
A Collection Appeals Program (CAP) is different from a CDP hearing in that it is generally faster and encompasses a broader array of collection actions. Furthermore, a taxpayer cannot bring their case to Tax Court on the appeal’s decision. The CAP process does not have the same legal significance as a CDP hearing. Lastly, taxpayers cannot challenge the underlying tax liability.
Other Differences with CAP in Terms of Appealing IRS Collection Actions
Taxpayers can appeal through the CAP process after receiving one of the following:
- After a Notice of Federal Tax Lien or before
- Before the IRS levies a taxpayer’s property or afterward (must be made within two years from the date of levy if the levy was made on after March 23, 2017)
- After or before the seizure of the taxpayer’s property. The taxpayer has ten business days to appeal to the Collection manager after the Notice of Seizure
- Denial or Termination of Installment Agreement
- Denial to withdraw a tax lien
- A denial of a tax lien discharge, subordination, and non-attachment
- When the IRS modifies an installment agreement or proposes to change it
What is a Notice of Federal Tax Lien
A federal tax lien is the government’s claim against a taxpayer’s property. A tax lien is a result of the taxpayer failing to pay their taxes owed after a demand for payment. The tax lien is legal and valid against all the taxpayer’s property, including real estate and personal property as well as financial assets.
Taxpayers can receive a tax lien after the IRS sends a Notice and Demand for Payment and the taxpayer neglects or refuses to pay the entire liability in the allotted time. When the IRS files a tax lien, the taxpayer will also receive a Notice of Federal Tax Lien Filing and Your Right to a Hearing (IRS Letter 3172).
A tax lien affects a taxpayer by attaching itself to all of the taxpayer’s assets and to future assets acquired. A taxpayer’s ability to gain credit is also likely limited.
What is a Notice of Intent to Levy
A levy grants the IRS the ability to seize your property and assets to satisfy taxes owed legally. The IRS can garnish wages, levy bank accounts, and take and sell property, including real estate, vehicles, and other personal property.
When the government is threatening to levy property, taxpayers may receive several different notices. Below are some of the common notices the IRS sends with an intent to levy and appeal rights:
- Letter 11: Final Notice of Intent to Levy and Notice of Your Right to a Hearing
- Letter 1058: Final Notice Replay Within 30 Days
- Final Notice of Intent to Levy: IRS CP90
- Notice of Levy upon Your State Tax Refund: IRS CP92
- IRS Notice of Levy upon Your State Tax Refund: IRS CP242
- Notice of Intent to Seize Your Property or Rights to Property: IRS CP504
- Intent to Seize Your Assets and Notice of Your Right to a Hearing: IRS CP297
How to File Form 12153
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Form 12153 requires information on the taxpayer’s background and contact information. Also, an explanation of their case and opinion on why they think the IRS should not serve a lien or levy on their property. Information the form asks for includes:
- Taxpayer’s contact information.
- The tax information, as shown on the notice of lien or levy. Taxpayers also need to attach a copy of the notice.
- The basis of the taxpayer’s hearing request.
- Whether they are applying for an Equivalent Hearing.
- Why you disagree with the filing of lien or levy or another IRS action and more.
A copy of Form 12153 and its instructions are available on the IRS website. It’s essential that taxpayers follow the directions carefully and entirely. Taxpayers that incorrectly fill out forms get rejected. Once the IRS receives Form 12153, the collections on taxes owed will stop in most cases.
If a taxpayer statute of limitations is getting close, they should know that filing for a CDP hearing tolls the timer. However, if the taxpayer files for an Equivalent Hearing, the clock keeps ticking. Remember, though, that filing an Equivalent Hearing prevents the taxpayer from taking their case before the Tax Court if they disagree with the appeals decision.
What Happens After a Taxpayer Requests a CDP Hearing
After a taxpayer requests a CDP hearing on time, they can look to work out a resolution with the collection office that sent the notice. If the taxpayer or their representative cannot work out a tax resolution, Appeals will ask the taxpayer to schedule a meeting or conference with the Appeals officer. The session can take place over the phone, in person, or by correspondence.
Once the CDP hearing ends the Appeals officer will provide a written determination letter. If the taxpayer does not agree with the Appeals officer, they can contest the matter further by petitioning the U.S. Tax Court by the deadline provided in the determination letter. The taxpayer cannot bring up new issues in court, but only tax issues reviewed during the CDP hearing.
If the Taxpayer Misses the 30-Day Deadline for a CDP Hearing Request?
If the taxpayer misses the 30-day deadline to request a CDP hearing and still wants to appeal, they can request an Equivalent Hearing. The taxpayer can use Form 12153. The taxpayer needs to send it to the address on the lien or levy notice. However, an Equivalent Hearing does not protect the taxpayer from a levy, nor does it suspend the statute of limitations on collection. Lastly, the taxpayer cannot petition a U.S. tax court after a decision by the IRS Office of Appeals.
The IRS does have deadlines to request an equivalent hearing. For example, the taxpayer has one year plus five business days to request an equivalent hearing after receiving a lien notice. If the taxpayer gets a lien notice, they have one year from the date of the levy notice to request an equivalent hearing.
Where do you Send IRS Form 12153?
There is a no specific address for anyone to send a completed Form 12153. Instead, taxpayers may mail their form to the address labeled on their Notice of Federal Tax Lien or Notice of Intent to Levy.
We recommend working with a licensed tax professional when appealing IRS collection actions. A licensed tax professional understands the tax code and ensure taxpayers receive an optimal tax resolution.