Help! The IRS says they are going to file a lien or levy my assets. What can I do?
The IRS allows every taxpayer the right to appeal before any seizure of property is made. Two different programs are available: the Collections Appeals Program (“CAP”) and the Collections Due Process Program (“CDP”). This blog will explain the basics, when a program can be used, and the pros & cons of each option.
Collection Appeals Process
CAP is available to taxpayers for the following IRS actions:
- Before or after the IRS files a Notice of Federal Tax Lien
- Before or after the IRS levies or seizes property
- Rejection, modification or termination of an installment agreement
If a lien or levy is involved, the first step is to communicate with an IRS officer. If the taxpayer disagrees with the IRS employee’s decision, you can ask for their manager to review the case. If the taxpayer and manager are unable to resolve the disagreement, the taxpayer can request a CAP appeals hearing by filing Form 9423, Collection Appeal Request, within 3 business days after the meeting with the IRS manager. For installment agreements, the taxpayer does not have to have a meeting with a manager if you disagree with a decision by an IRS revenue officer. You would appeal by completing Form 9423 and sending it to IRS office which took an action on the installment agreement within 30 calendar days of the IRS action.
The IRS will normally stop collection actions until the appeal is settled. The major advantage of a CAP hearing is that it generally results in a quicker appeal decision. The major disadvantage is decisions reached through a CAP hearing are binding on both the IRS and taxpayer, and cannot be appealed any further.
Collections Due Process
CDP is available to taxpayers for the following IRS actions:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
- Final Notice – Notice of Intent to Levy and Notice of Your Rights to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund-Notice of Your Right to a Hearing
- Post Levy Collection Due Process Notice
The taxpayer has a right by law to a CDP hearing once they receive an IRS notice advising them of this right. The taxpayer would make an IRS appeals request by filing Form 12153, Request for a Collection Due Process or Equivalent Hearing. The taxpayer must identify their alternatives to, or their reasons for, disagreeing with the lien or levy. The taxpayer may still attempt to resolve issues with the IRS after requesting a hearing; the appeal request can be withdrawn if a satisfactory resolution is reached before the CDP hearing date. The IRS will suspend the 10-year period it has to collect taxes until the appeal determination becomes final or the taxpayer withdraws the hearing request.
During a CDP hearing, the taxpayer can raise any relevant issue relating to the lien or levy, and may be able to challenge the underlying tax liability. The IRS will issue its determination as a result of the hearing. One of the major advantages of a CDP is the taxpayer has the right to appeal the determination in Tax Court.
The IRS does indeed offer an appeals process, but it’s not easy for most taxpayers to follow. It is in your best interest to use an experienced tax professional to work with the IRS. Gary Kaplan, CPA, is qualified to represent taxpayers before the IRS. Gary can help you collect your information and consider what course of action works best for you.
