Appeals rights at an IRS Collection Due Process (CDP) hearing are important now that the IRS has reinstated their tax collection function. There was a long freeze in most IRS tax collection efforts due to the pandemic. The IRS did not want to unfairly burden the public during the economic contraction when many were struggling financially.
When the IRS issues a final notice of threat to levy, or has filed a Notice of Federal Tax Lien (NFTL) or already issued a levy, the taxpayer will receive an IRS notice (Letter 11, Letter 1058 or CP 90) informing them of their right to a Collection Due Process (CDP) hearing. It is important that taxpayers act promptly. There is a thirty day period to request the Collection Due Process (CDP) hearing with IRS Appeals. If you miss the deadline you can request an Equivalency Hearing (EH) up to a year after the notice was sent. There are various rights at a Collection Due Process (CDP) hearing that are superior to an Equivalency Hearing (EH) so it is important to respond promptly. Some may opt for an Equivalency Hearing (EH) instead of a Collection Due Process (CDP) hearing even when responding within the 30 day window.
What is important to note is that you can contest the issuance of the tax lien or tax levy at one of the hearings and present an alternative to full payment of an unpaid tax:
- Installment Agreement: payment plan
- Offer in Compromise: settle tax for less than owed
- Currently Not Collectible: hardship status
- Innocent Spouse Relief: argue that you do not owe the tax and instead your spouse or former spouse is responsible.
Failure to enter into a collection alternative will lead to potential:
- Tax Levies: bank accounts, wages, commissions, retirement accounts, social security income, etc.
- Tax Liens: applies to all current and future assets of the taxpayer. This includes real estate, vehicles and anything else of value.
Secure your Collection Due Process (CDP) rights as soon as possible to stop collection enforcement during the Appeals process and also to ensure your right to judicial review if you disagree with the Appeals decison. This will ensure the best resolution of your tax issue.