Understanding Your Right to a Collection Due Process Hearing with the IRS

Comprehensive Review of Your Rights to a Collection Due Process Hearing Before the IRS

Under certain circumstances and upon the Internal Revenue Service issuing certain collection notices, you have the right to request a Collection Due Process Hearing. Requesting and holding a Collection Due Process Hearing before the IRS Appeals Office can be a very beneficial tool in resolving an outstanding tax liability. The article below provides detailed information relating to a Collection Due Process Hearing.

What is a Collection Due Process Hearing?

A Collection Due Process Hearing is a right afforded to a taxpayer when the IRS has proposed a levy or enforcement action to collect on a tax debt. The hearing allows the taxpayer to work with an impartial appeals officer towards a collection alternative to resolve the debt as opposed to the proposed levy action by the IRS.

When Can a Taxpayer Request a Collection Due Process Hearing?

The most common time a taxpayer has the right to request a Collection Due Process Hearing is upon the IRS issuing a Final Notice of Intent to Levy. A Final Notice of Intent to Levy is also known as Letter 11 (L 11) or Letter 1058 (L 1058). A taxpayer has 30 days from the date on the Final Notice of Intent to Levy to request the hearing.

How Does a Taxpayer Request a Collection Due Process Hearing?

The taxpayer makes the request by filing Form 12153 with the service center or revenue officer who issued the Final Notice of Intent to Levy. Form 12153 is completed with the taxpayer’s general information, the tax periods of which the Final Notice of Intent to Levy was issued upon or included on the notice, the reason the hearing is being requested, and the proposed collection alternative. The hearing request can be faxed and/or mailed to the appropriate party within the IRS.

What Are the Benefits or Potential Benefits of Requesting a Collection Due Process Hearing?

While there are many benefits to requesting a Collection Due Process Hearing, perhaps the biggest or most advantageous benefit is the stay or hold on enforcement action that is afforded the taxpayer when a timely hearing request is filed. When a taxpayer timely requests a collection due process hearing, there is an automatic hold on IRS collection actions such as bank levies, wage garnishments, and other asset seizures. Please note that the automatic stay on enforcement action may not apply when the taxpayer owes 941 employment taxes and the taxpayer is not in compliance with the current quarter. This stays on enforcement, which allows the taxpayer time free of levies and seizures to prepare for the hearing and make a proposal to resolve the outstanding tax liability based upon their current financial circumstances.

Once a Collection Due Process Hearing is Requested, What Can I Expect?

Generally, the taxpayer will receive a notice from the IRS Appeals Office within 30-60 days from requesting the hearing that their hearing request has been received, and an appeals officer will contact the taxpayer once assigned to the case. Thereafter, the taxpayer will receive a notice from the appeals officer assigned calling an initial hearing or conference date. The initial hearing or conference date can be adjusted by the taxpayer, but the taxpayer must contact the appeals officer to reschedule the hearing date. The notice from the appeals officer will generally request additional information the taxpayer wishes to present and produce during the hearing relating to the resolution proposal the taxpayer is proposing. This information could be financial statements and information relating to an installment agreement, an offer in compromise, or perhaps a request that the liabilities be placed in a currently non-collectible status.

What is the Procedure or Process of Working With the IRS Appeals Office?

First, the appeals officer will verify that the IRS has taken all required and legal steps towards a collection of the debt and that the taxpayer has received their proper due process. Further, the appeals officer verifies that they have had no prior involvement with the applicable case or taxpayer and are a true impartial party to the matter. Upon establishing the hearing or conference date, the taxpayer will need to compile the necessary information, documents, and statements to submit to the appeals officer along with their proposal to resolve the tax liability. If the taxpayer was an individual and owed individual income tax, they would draft an individual collection information statement, also known as Form 433A, and compile all of the necessary attachments such as W-2s, income statements for self-employment income, bank statements, current statements for stocks, bonds, 401(k)s, mortgage statements, etc., to verify the income, expenses, and assets stated on the financial statement. If the taxpayer was a business or the applicable individual owned a business, the taxpayer would also need to compile Form 433B, which is a collection information statement for businesses. The taxpayer would use the financial statements and documents to propose an installment agreement or request their liabilities be placed in a non-collectible status. A taxpayer can also request a settlement, known as an offer in compromise, through the hearing process. If a taxpayer requests an offer in compromise through the hearing process, the offer will be submitted by the appeals officer (usually) to the IRS Offer in Compromise Unit, and the appeals officer will maintain the file while the IRS Offer in Compromise Unit makes an initial determination on the offer. If the determination on the offer needs to be appealed to the appeals office and the taxpayer appeals the initial offer determination, the appeals officer will then have control or jurisdiction of the appeal. Inevitably, through the appeals hearing process, the appeals officer will make a determination relating to a resolution of the liabilities.

What Are the Potential Outcomes of Holding a Collection Due Process Hearing?

The outcome or determination issued by the appeals officer through the hearing process may be dictated by the resolution proposed by the taxpayer. If the taxpayer has proposed an installment agreement and the appeals officer and taxpayer agree on the terms and conditions of an installment agreement, the appeals officer will issue a determination that an installment agreement has been reached, and thus, the levy action proposed by the IRS is not sustained. In short, if the taxpayer and appeals officer come to a collection alternative, then the appeals officer will issue their determination stating the agreement that has been reached and that collection action is not sustained. However, if an agreement or resolution cannot be agreed upon with the appeals officer, the determination made by the appeals office will state that the proposed levy action by the IRS is sustained, and thus, the taxpayer is open to enforcement such as levies once the file or case is returned to IRS Collections or the IRS revenue officer.

What if I am Unable to Establish a Formal Agreement Through the Collection Due Process Hearing?

If you cannot come to an agreement with the appeals officer, it does not mean an agreement is not possible. You are still able to enter into an installment agreement or submit an offer in compromise through the IRS Offer Unit, but you would do so outside of the context of the appeals hearing or appeals office. The key would be to work on formalizing or proposing an agreement as quickly as possible after the appeals hearing concludes because, technically, once the matter is back before the IRS Collections Department or the revenue officer, you are subject to enforcement because there is no longer a stay or hold on enforcement.