The collection due process (CDP) hearing is a vital option for those taxpayers looking to appeal Internal Revenue Service (IRS) levy actions and liens, but most either have no idea what the CDP hearing is or do not understand what they need to do to make it work for them.
In truth, almost every individual understands that getting a notice from the IRS can be scary, especially if it says you’ve done something wrong with your taxes or failed to pay. But, when taxpayers find themselves in a position where they will have to endure a due process hearing, the whole situation can become extremely overwhelming.
Fortunately, it does not have to be. This guide will walk you through CDP procedures, including what they are, what the process entails, and how you can get through them as smoothly as possible.
The Basics of IRS Collections
If taxpayers do not pay their taxes in full when they file their tax return, they will receive a bill for the amount that they will have to pay. Ultimately, this bill will start the collection due process hearing and continue until the account is satisfied or the IRS can no longer legally collect the tax, such as when the time period for collection expires.
It is essential to realize that this unpaid balance is subject to an interest that will be compounded daily and a monthly late payment penalty. That is why it is in your best interest to pay this tax liability as soon as possible to minimize your charges.
What to Know About IRS Collection Due Process Hearings
A CDP hearing is a way for taxpayers to discuss alternatives to enforced collections, and allows them a way to dispute the amount owed if they had no prior opportunity to do so. Typically, the hearing can be requested by a taxpayer when they receive one of the following notices:
- A Final Notice — Notice of Intent to Levy and Notice of Your Right to a Hearing, Letter 1058
- A Notice of Federal Tax Lien Filing, Letter 3172
- A Notice of Jeopardy Levy and Right of Appeal, Letter 2439
- A Notice of Levy on Your State Tax Refund — Notice of Your Right to a Hearing, CP 92 or Final Notice Before Levy on Social Security Benefits, CP 298.
The CDP hearing was introduced more than 20 years ago to protect taxpayers from the IRS overreaching. It is now done routinely, but whether you can request a CDP hearing will depend on your unique situation and the revenue officer’s actions.
Real-World Example
We recently represented a medical equipment supplier from Ohio City who serviced Cleveland Clinic and University Hospitals. The IRS filed a federal tax lien for $89,000 in unpaid payroll taxes from 2021-2022 when his business struggled during staffing shortages. He received Letter 3172 and contacted us immediately.
We filed Form 12153 within the 30-day deadline requesting a CDP hearing. During the four-month wait, our Cleveland tax lawyers prepared his case, gathering contracts from both hospitals showing receivables of $145,000. At the hearing conducted by an IRS Settlement Officer from the Cleveland office on East 6th Street, we proposed an installment agreement of $2,400 monthly over 48 months.
We demonstrated that a lien would damage his creditworthiness with medical suppliers, potentially costing him his hospital contracts. The Settlement Officer agreed to withdraw the lien filing if he maintained three consecutive monthly payments. He made the payments, the lien was withdrawn, and he kept his contracts with both hospitals. Without the CDP hearing, that lien would have appeared on his credit report for seven years, likely destroying his business relationships in Cleveland’s tight-knit medical supply community.
4 Steps for Navigating an IRS Collection Due Process Hearing
Under the Internal Revenue Code Section 6320, When the IRS plans to take your wages or put a lien on your property, you have rights. Tax law gives you the chance to request a hearing with an independent officer. Here’s some steps to stopping IRS collection actions.
When You Can Request a Hearing
You get the right to request a hearing when the IRS sends you one of these notices:
- Notice saying they plan to take your wages, bank accounts, or property (levy)
- Notice that they filed a tax lien against your property
Step 1: Ask For Your CDP Hearing
You have 30 days from the date on the IRS letter to request your hearing. Fill out Form 12153 and mail it to the IRS right away. On this form, tell them why you think they should not take your property or wages.
Include these details in your request:
- Your personal information
- Which notice you received
- Why the IRS should not levy your assets
- Any payment plans or other solutions you want to discuss
Step 2: Collection Stops While You Wait
Good news – once you request your hearing, the IRS must stop trying to collect from you. They cannot take your wages or seize your property while you wait for the hearing.
Step 3: Attend Your Hearing
A Settlement Officer who has never worked on your case before will run your hearing. They will look at:
- Whether the IRS followed all the rules
- Other ways you could pay your tax debt
- Whether taking your property is necessary
The hearing happens by phone or in person. You can bring documents that support your case.
Step 4: Obtain your ruling
The officer will send you a Notice of Determination with their decision. This document will:
- Confirm the IRS followed proper procedures
- Address any issues you raised
- Include any agreement you reached with the IRS
If you don’t like the decision, you have 30 days to appeal to Tax Court.
What This Hearing Can Do for You
These hearings help taxpayers in several ways:
- Stop wage garnishments and asset seizure
- Set up payment plans that fit your budget
- Get penalties removed if you qualify
- Negotiate an Offer in Compromise to pay less than you owe
- Request Currently Not Collectible status if you cannot pay
Our tax lawyers can help you prepare for your hearing and present your case. We know which arguments work best and can negotiate with the IRS on your behalf. Many taxpayers get better results when they have expert help with these hearings.
What You Can and Cannot Dispute at a CDP Hearing
When you request a CDP hearing, you need to know which arguments will help your case and which ones will hurt it. Understanding this difference can save you time and money while giving you the best chance of success.
What You Can Argue at Your CDP Hearing
You have the right to challenge whether you really owe the tax debt if you have never had the chance to dispute it before. This means you can argue that you already paid the taxes, that the IRS made a mistake when calculating what you owe, or that too much time has passed for the IRS to collect the debt (this is called the statute of limitations).
The hearing officer must listen when you propose different ways to pay your tax debt. You can suggest setting up a payment plan that fits your budget, request an Offer in Compromise to pay less than the full amount, or ask for Currently Not Collectible status if paying would prevent you from covering basic living expenses like food and housing.
If you’re married and believe your spouse created the tax problem without your knowledge, you can request innocent spouse relief during the hearing. This protection helps spouses who should not be held responsible for taxes they did not know about or help create.
The Settlement Officer must consider whether the IRS collection action makes sense for your situation. They have to balance the government’s need to collect taxes with your right to be treated fairly. This means they cannot use collection methods that are more harsh than necessary for your case.
Arguments That Will Get Your Case Dismissed
You cannot challenge the amount of tax you owe if you already had the opportunity to dispute it in another proceeding. The IRS will not let you re-argue the same issues multiple times in different hearings.
Some taxpayers try to argue that income taxes are unconstitutional or that wages do not count as income. These arguments are considered frivolous by the courts and will get your case thrown out immediately. Even worse, making these arguments can result in a $5,000 penalty on top of your existing tax debt.
You cannot bring up evidence that you deliberately hid from the IRS during earlier proceedings. The hearing officer will reject any information you could have provided before but chose not to share.
If you have enough money or assets to pay your tax debt, the Settlement Officer will not approve an Offer in Compromise based solely on hardship. The IRS expects people who can afford to pay their full debt to do so.
Personal opinions about tax laws being unfair or complaints about how the government spends tax money carry no weight in these hearings. The Settlement Officer focuses on tax law and collection procedures, not political arguments.
CDP vs. Equivalent Hearing: Critical Differences
When You Miss the 30-Day Window
If you miss the 30-day deadline for requesting a CDP hearing, you can still request an Equivalent Hearing using the same Form 12153. You have one year from the date of the notice to request this alternative. The Settlement Officer will review the same issues and consider the same collection alternatives. However, the crucial difference is that you cannot appeal an Equivalent Hearing determination to Tax Court. You also don’t get automatic collection suspension during an Equivalent Hearing. The IRS can continue collection actions while your case is under review. This makes timing critical. Missing that 30-day window eliminates your judicial appeal rights and leaves you vulnerable to continued collection activity.
How to Prepare Your CDP Hearing Package
Essential Documentation to Gather
Start preparing your case immediately after filing Form 12153. Create a complete financial picture using Form 433-A (individuals) or 433-B (businesses). Gather three months of bank statements for all accounts, proof of monthly expenses including utilities and insurance, documentation of assets and their values, and recent pay stubs or profit/loss statements. If proposing an offer in compromise, calculate your reasonable collection potential. For installment agreements, determine the maximum monthly payment you can sustain. Include any special circumstances documentation: medical bills, job loss notices, divorce decrees, or natural disaster impacts.
Writing Your CDP Hearing Request Letter
Your Form 12153 submission should include a detailed cover letter. State the tax years and types involved. Clearly identify which collection action you’re responding to. Explain your proposed resolution and why it serves both parties’ interests. Address any liability disputes with specific facts and documentation references. Describe financial hardships affecting your ability to pay. Request specific alternatives like partial pay installment agreements or penalty abatement. Keep the tone professional and factual. Avoid emotional appeals or lengthy narratives. The Settlement Officer reviews hundreds of cases. Make yours clear, organized, and solution-focused.
Post-Hearing: Your Rights and Options
If You Disagree with the Determination
When you receive an unfavorable Notice of Determination from a CDP hearing, you have exactly 30 days to petition the Tax Court. This deadline is absolute and cannot be extended. Filing with Tax Court costs $60 and doesn’t require an attorney, though complex cases benefit from legal representation. The Court will review whether the IRS abused its discretion. You’ll need to prove the Settlement Officer failed to properly consider your proposed alternatives or made procedural errors. During Tax Court proceedings, collection actions remain suspended. If you received an Equivalent Hearing determination instead, your only option is requesting reconsideration from Appeals or waiting to propose new collection due process alternatives when circumstances change significantly.
Common Collection Due Process Pitfalls
The CDP hearing may seem relatively straightforward, but there are still common issues that people may run into during the proceedings, including:
- If the Collection Due Process request form is not completed correctly, it can be quickly rejected.
- Remember, the IRS is always looking for ways to reject a form, so even the smallest of mistakes can result in a detrimental outcome.
- There are stringent time requirements when it comes to the Collection Due Process.
- For instance, if you do not file a Collection Due Process request form within 30 days, you can lose the right to a hearing request.
If you decide to fight the IRS through the CDP hearing, it may seem like a monumental undertaking. But it does not have to be, especially when you contact the experts.
Your CDP Rights Expire Quickly, Get Legal Help.
The IRS sends millions of collection notices every year. Most taxpayers ignore them until wages get garnished or bank accounts freeze. By then, your CDP hearing rights may have expired. You get one shot at stopping IRS collection through a CDP hearing, and that window closes 30 days after your notice date. Miss it and you lose your right to Tax Court appeal. Miss it and collection continues during any review. Every day you wait reduces your options and increases your debt through penalties and interest. A CDP hearing forces the IRS to consider your situation and explore alternatives.
Without it, you’re just another account number in their collection queue. Tax professionals know how to present your case effectively. They know which financial forms matter, what documentation wins cases, and how Settlement Officers think. One properly filed Form 12153 can stop a levy, prevent a lien, and create breathing room to resolve your tax debt reasonably.
Don’t let procrastination cost you thousands in unnecessary payments or lost assets. Read your IRS notice today, mark the deadline, and take action by contacting our tax team before your rights disappear.
