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 process 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.
4 Steps for Navigating an IRS Collection Due Process Hearing
Under the Internal Revenue Code Section 6320, you have a right to request a hearing before an impartial officer when the IRS either put you on notice of the IRS’s intent to file a levy against you or filed a federal tax lien against you. The following will walk you through what you need to once you receive this notice:
Step 1: Request a CDP hearing
Once you receive one of the above notices from the IRS, you will have approximately 30 days from the letter’s date to file a CDP hearing request. You will need to submit a Collection Due Process Request on IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing, to request this hearing.
You will need to provide your background information as well as the reasons you believe the IRS should not pursue a lien or a notice of intent to levy against you.
Step 2: Wait for the hearing
As you are waiting for the CDP hearing, the IRS will suspend their collection efforts during this period of time.
Step 3: Go through the hearing
This CDP hearing is usually conducted by a Settlement Officer who has not previously been involved in your case. This hearing will likely focus on whether there are other collection methods available under the circumstances.
Step 4: Obtain your ruling
The outcome of the CDP hearing will appear in the Notice of Determination, which will be prepared by the appeals officer. This Notice will confirm that all the procedural requirements are met in your case and will also decide the merits of any issues asserted by you.
If you were able to reach an agreement on any relief, this Notice will provide the agreement’s conditions. If there is an adverse ruling, then you will have 30 days to appeal the findings with the Tax Court.
These hearings can provide taxpayers with numerous benefits. However, to decide if it is the right option, taxpayers need to consider multiple factors and speak to tax defense professionals that can walk them through this challenging situation.
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.
Get Legal Help Taking on the Collection Due Process Hearing
Figuring out the best tax relief for your specific circumstances can be rather complicated, especially if you are considering a collection due process hearing. Contacting Silver Tax Group means you can get the legal help you need to get through this challenging ordeal.
Our experienced tax professionals are standing by to discuss any CDP hearing questions you may have and help you figure out your next steps. Give us a call to get started today.
