When to file a request for a Collection Due Process or Equivalent Hearing (CDP) IRS form 12153 - John R. Dundon II, Enrolled Agent
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When to file a request for a Collection Due Process or Equivalent Hearing (CDP) IRS form 12153

When to file a request for a Collection Due Process or Equivalent Hearing (CDP) IRS form 12153

The IRS Restructuring and Reform Act of 1998 established the Collection Due Process or Equivalent Hearing (CDP), which is an appeal filed in response to the following collection actions: Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC Sec. 6320; Notice of Intent to Levy and Notice of Your Right to a Hearing; Notice of Jeopardy Levy and Right of Appeal; and Notice of Levy on Your State Tax Refund–Notice of Your Right to a Hearing. For each period of liability accrued by a taxpayer, the IRS is required to issue a series of notices providing instruction on how to pay the assessed balance, establish a repayment agreement to resolve the assessed balance, or contest the assessed balance if the taxpayer does not agree with the amount proposed. These notices are intimidating and will usually contain progressively more aggressive language regarding payment of any balance assessed.  These notices culminate so to speak with the issuance of a Final Notice of Intent to Levy. This Final Notice of Intent to Levy, issued under IRM 5.11.1.2.1, notifies a taxpayer of his opportunity to file a CDP, request an equivalent hearing, or be subject to enforced collection action such as lien and levy against all period(s) of liability included in the notice. The IRS affords this same opportunity in response to the filing of a: Federal tax lien, Notice of Jeopardy Levy, or Notice of Levy on Your State Tax Refund. Many taxpayers respond to a Final Notice of Intent to Levy by filing a CDP, IRS FORM 12153. It is important to be practical, especially in dealing with collection and compliance issues, in determining when to file a CDP. Knowing the required time frame for filing a CDP and the correlating effects on your rights will not only provide protection from collection action but also maintain the ability to further pursue the disputed issue in Tax Court if needed. Any CDP not filed within the time frame specified by the IRS will result in an equivalent hearing instead of a CDP hearing. What is the difference? While the same issues can be addressed in CDP and equivalent hearings, a timely- filed CDP mandates that a taxpayer be given the opportunity to a hearing in advance of any collection action against the period(s) of liability included in the appeal; whereas, an equivalent hearing does not afford a taxpayer protection from collection action nor does it allow an opportunity to petition the Tax Court. In evaluating whether to file a CDP in response to a Final Notice of Intent to Levy consider the following:

 

  • First, determine whether the issue can be resolved with the IRS locally and whether or not the issue requires urgent attention.
  • Second, be aware that filing a CDP in response to a Final Notice of Intent to Levy for employment taxes subjects a taxpayer to future, immediate enforced collection through a Disqualified Employment Tax Levy (DETL). Under IRC Sec. 6330(h), the DETL allows the IRS to enforce collection immediately upon assessment of future employment tax accruals if a CDP has been filed within the prior two years. This is a newly-enacted collection tool that should be researched and fully understood for anyone filing a CDP regarding employment taxes.
  • Third, consider collection statute expiration dates of the periods in question per IRM 5.1.19. Finally, and most importantly, ensure the validity of the CDP as the IRS has instituted an additional penalty under IRC Sec. 6702(b) for appeals based on a “specified frivolous position.” Once the CDP is received by the IRS it will be processed and assigned to an appeals or settlement officer for a hearing. Appeals officers, who are often CPAs and attorneys, will typically be trained in examination and deal mainly with income tax issues while settlement officers are trained primarily in collection and compliance issues.
  • Fourth. Appeals and settlement officers will review the filed CDP and contact the taxpayer to schedule a hearing. At the hearing, the taxpayer is given an opportunity to present information regarding the period(s) of liability and/or collection alternatives other than lien, levy, or seizure.  The assigned appeals or settlement officer will weigh the information presented in the hearing and any associated hazards of litigation before issuing a determination or making an additional information request from the taxpayer. If the taxpayer does not ultimately agree with the determination of the appeals or settlement officer, the required written determination from the IRS provides instruction on petitioning the Tax Court to pursue the issue further.



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