I've worked with many good Realtors over the years who find themselves in trouble with the IRS. They receive a notice of Federal Tax Lien or notice of Intent to Levy, and don't know what to do about it.
Fortunately, taxpayers have powerful appeal rights.
The IRS Collection Division cannot simply levy a taxpayer's bank account, or put a lien on their property, or seize assets whenever it wants to!
Congress stepped in years ago and created Collection Due Process (CDP) rights for taxpayers.
When you - or your real estate client - exercise CDP rights, a number of good things happen:
- Collection activity ceases immediately
- The case if forwarded to the Appeals Division (and out of Collections)
- You ensure you have a right to ultimately take your case up to Tax Court
And yet less than 3% of taxpayers - or the tax pros who represent them - request a CDP hearing!
That's why I'm publishing this important information.
How to Exercise Your CDP Rights
You can invoke your appeal rights whenever a Notice of Federal Tax Lien is filed -- or when the IRS issues a Notice of Intent to Levy.
If you receive such a notice, you have 30 days to request a CDP hearing. The clock is ticking. The window of opportunity closes if you don't open your IRS mail, or don't understand your appeal rights.
Your appeal request is made by filing IRS Form 12153, Request for Collection Due Process Hearing
Once the IRS receives it, all collection activity stops for the specific tax period covered by the lien or levy notice. (Note, hovwever, that if you have older tax periods on which CDP rights have expired, collection enforcement may continue on the debt from those prior years.)
Who Conducts the Appeals Hearing
Your case is assigned to a Settlement Officer (SO) in the IRS Appeals Divison. This is important because the SO is not part of the Collections Divison. He or she has no 'stake' in collecting money from you.
Instead, the SO's job is to work with taxpayers to quickly and fairly resolve their tax matter. The SO's goal is to prevent your potential case from clogging up the IRS Tax Court docket. Tax Court can be expensive, and time consuming, both for taxpayer and the IRS.
So the Settlement Officer mails a letter to you, scheduling the hearing and explaining what you need to provide prior to the hearing.
"What's needed" for the Hearing?
- any unfiled returns must be filed prior to the hearing
- documentation that your current year withholdings or estimated payments are being made on a timely basis
- a Collection Information Statement
- a proposal from the taxpayer to resolve the tax matter
Obviously, you'll likely want to get professional help to prepare for the hearing and represent you at the hearing.
You noramlly wouldn't go to court without an attorney. Similarly, you wouldn't go to a CDP hearing without an Enrolled Agent, CPA or tax attorney. But not just any EA, CPA or attorney.... You want one who specializes in IRS Representation.
That said, the CDP hearing itself can be relatively informal in nature, and done by phone.
What Happens Next?
The Settlement Officer will issue what's called a Notice of Determination after the hearing. You'll then have one of two options going forward:
- You agree with the outcome (ie, the plan to fix your tax matter.)
- You disagree, and choose to further pursue your case in US Tax Court
CDP hearings provide many benefits to taxpayers, so it is important to know your CDP rights.
If you have received an IRS Notice of Federal Tax Lien or Notice of Intent to Levy, I can help you learn your options and determine your best 'next steps', end your IRS stress, and even settle for less.
I specialize in assisting taxpayers in trouble with the IRS, and am well acquainted with navigating the IRS Collections and Appeals processes. If you have questions, contact me at 757-346-1040 or firstname.lastname@example.org. If you're looking for more information, see my video explaining Collection Due Process here: https://youtu.be/d1mUl5MxcY8