Complete Guide to an IRS Collection Due Process Hearing
How a Collection Due Process (CDP) Hearing Works & When to Use
Created by the IRS Restructuring and Reform Act of 1998, Section 6320 of the U.S. Tax Code gives taxpayers the right to a Collection Due Process (CDP) hearing if the IRS intends to levy their assets or issue a federal tax lien. A CDP hearing allows taxpayers to dispute how much they owe and explore alternatives to enforced collection actions.
This guide explores critical FAQs about CDP hearings to help you understand your rights and the CDP hearing process. You can also contact us directly for help. We have extensive experience assisting clients in requesting and navigating CDP hearings at The W Tax Group.
What Is a Collection Due Process Hearing?
Due process means fair treatment through the judicial system. Collection due process simply refers to fair treatment in the tax collection process. A CDP hearing ensures that the IRS doesn’t seize your assets or issue tax liens unfairly.
A CDP hearing is designed to protect your rights. If the IRS plans to issue a federal tax lien or seize your assets for unpaid taxes, the agency must notify you of your right to a CDP hearing.
The hearing gives you a chance to explain your situation to the IRS. You can dispute the amount of tax due, ask for a payment plan, request certain types of tax relief, or explore other alternatives to a levy.
When Can You Request a Collection Due Process Hearing?
You can request a Collection Due Process hearing if you receive a notice that the IRS plans to issue a federal tax lien or levy against you. Here are the most common IRS notices you may receive:
- Letter 3172 (Notice of Federal Tax Lien Filing)
- Letter 1058 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing)
- Letter 2439 (Notice of Jeopardy Levy and Right of Appeal)
- Notice CP92 (Notice of Levy on Your State Tax Refund and Notice of Your Right to a Hearing)
- Notice CP298 (Final Notice Before Levy on Social Security Benefits)
These notices explain that the IRS plans to issue a federal tax lien or levy your assets. They also explain that you have a right to a CDP hearing. You must request your CDP hearing by the date noted on the notice.
You have 30 days from the notice date for a levy to request a hearing. If the IRS issues a federal tax lien, the agency must notify you within five days, and then, you have 30 days to request a hearing.
If the IRS is levying your state tax refund or payments you receive as a federal contractor, the IRS may serve the levy before it sends you the notice. As a result, in these situations, you may end up requesting the CDP hearing after the levy has been served.
Can You Request a CDP Hearing If You Receive CP504 (Urgent Notice)?
Notice CP504 also alerts you that the IRS plans to levy your assets for unpaid taxes. But, this notice does not outline your right to a CPD hearing. Instead, it typically states that you will receive another notice about your right to a hearing.
Generally, you will receive CP504, and then you will receive one of the notices listed above. However, this doesn’t mean that you should ignore CP504. To protect your assets, you should reach out for help as soon as possible.
How to Request a CDP Hearing
File Form 12153 (Request for a Collection Due Process or Equivalent Hearing) to request a CDP hearing. Postmark this form by the date noted on your notice. A tax professional can help you file this form correctly.
How to Fill Out Form 12153
Form 12153 requires basic information about you and the tax you owe. It allows you to suggest collection alternatives such as installment agreements, offers in compromise, or hardship. If applicable, you can request innocent spouse relief.
If you’re requesting a CDP hearing because you disagree with the tax owed, you should note one of the following reasons on the form:
- I am not liable for the tax — You can only use this option if you didn’t receive a deficiency notice explaining why you owe the tax.
- I should not be responsible for penalties — If you had reasonable cause for paying the tax late, the IRS may agree to waive the penalties.
- I have already paid the tax — You should use this option if you believe that the IRS didn’t credit one of your previous tax payments.
- Other — You can also write in other reasons that you dispute the tax.
If you don’t explain the reason for your dispute, the IRS will not honor your request for a CDP hearing.
What Happens If You Miss the Deadline to Request a CDP Hearing?
If you miss the deadline to request a CDP hearing, you can request an Equivalent Hearing. You have 12 months from your notice date to request an Equivalent Hearing. You can also use Form 12153 to request an Equivalent Hearing. Just tick the box that says you’re requesting an Equivalent Hearing.
What Happens If You Request a CDP Hearing?
Once you request a CDP hearing, the IRS will stop collection action on your account. The clock will also stop ticking on the collection statute of limitations. The IRS cannot go through with the levy until you get a hearing.
Who Conducts the CDP Hearing?
A Settlement Officer (SO) from the IRS Independent Office of Appeals conducts the CDP hearing. The Settlement Officer has no prior involvement with your tax issue, and they take an impartial look at the situation.
What to Expect at the CDP Hearing
CDP hearings are not formal hearings in courtrooms. Most CDP hearings are relatively informal and take place over the phone, but you can request a face-to-face hearing.
During the hearing, the Settlement Officer will go over the facts of the situation and the documents you have provided. They typically try to resolve the issue in a single phone call, and they consider the following:
- The timeliness of your request.
- Defenses or challenges you’re making about your tax liability.
- Alternative collection ideas.
- The appropriateness of a lien or levy in relation to how much you owe.
If you are disputing the tax due, the hearing will focus on your appeal. Otherwise, CDP hearings primarily focus on helping you negotiate a payment plan or find other ways to take care of your tax liability.
What Happens After a CDP Hearing?
The Appeals Officer will put the results of the CDP hearing in a Notice of Determination. The Notice of Determination will explain whether or not the IRS met procedural requirements while trying to collect the tax. It will also address any issues brought up by the taxpayer during the hearing. If the taxpayer and the Settlement Officer reached an agreement during the hearing, the notice will outline the terms of their agreement.
For example, if the taxpayer argues that the IRS didn’t follow the correct procedures, the notice will explain the merits of the taxpayer’s argument. Then, it will confirm whether or not the IRS followed the correct procedures. Similarly, if the taxpayer requested innocent spouse relief, the letter will summarize the taxpayer’s argument and explain if they received relief or not.
The Notice of Determination will also explain the terms of payment plans, offer-in-compromise agreements, or other agreements decided on during the CDP hearing.
What If You Disagree With the Results of a CDP Hearing?
If you disagree with the results of your CDP hearing, you have 30 days to appeal. When you receive the Notice of Determination, it will explain how to submit an appeal with the Tax Court.
What Are the Benefits of a CDP Hearing?
The main benefit of a CDP hearing is that it can help you avoid a tax levy or a lien on your assets. It allows you to talk with someone outside the IRS’s Collection Division. You get to negotiate an arrangement with someone who is impartial about the situation.
CDP Hearings and Disqualified Employment Tax Levies
There are special rules about requesting CDP hearings related to employment tax levies. Normally, when you request a CDP hearing, the IRS must pause enforced collection actions. This rule does not apply if you have a disqualified employment tax levy.
If the IRS plans to levy your assets due to unpaid employment tax, the agency will stop collection actions if you request a CDP. However, if you incur an additional unpaid employment tax and the IRS sends you a notice of intent to levy for that tax period, you can still request a CDP hearing, but this time, your request will not pause the levy.
Who Can Represent You at a CDP Hearing?
You can represent yourself at a CDP hearing, or you can have one of the following professionals represent you: Certified Public Accountants (CPA), enrolled agents (EA), or attorneys. Although any attorney can represent you, you should choose a tax attorney for the best results. They have the experience you need.
Your immediate relatives can also represent you, and if you’re dealing with a business tax issue, full-time employees, general partners, or bona fide officers can represent you.
Get Help with CDP Hearings
Don’t let the IRS seize your assets. Get the help you need to avoid tax liens and levies. At The W Tax Group, we specialize in helping people with unpaid tax liabilities deal with the IRS. We can help you through the CDP hearing process. Contact us today.