This week, we are talking about owing the IRS money. In my book: Everything You Wanted to Know About the IRS – Audits, Appeals, and Collections, I discuss these topics in great detail. This week I will be providing condensed chapters from the book.
On Monday we discussed the IRS’s Fresh Start Initiative, Tuesday we turned out attention to Installment Arrangements, and yesterday we discussed your rights as a taxpayer. Today we will discuss appealing the amount that you owe the IRS.
If you have just ignored the IRS’s demands for payment the IRS will begin enforcement and file a Tax Lien against you. With the lien, they will be able to levy your assets. The first step in the levy process is to file Intent to Levy Notice.
Once this letter has been issued, the IRS gives the taxpayer 30 days to appeal the collection process. In order to stop the levy from happening you must request a Collection Due Process Hearing (CDP).
A CDP Hearing is the only action, short of paying what you owe, that will stop a levy or lien from being filed. As I mentioned earlier, you have 30 days from the time that you receive the final Intent to Levy Notice. The IRS cannot file a lien or a levy against you until you have had a chance to be heard in a hearing. To request a CDP hearing you have to file Form 12153 with the Internal Revenue Service. You should send this request by certified mail with a return request. The IRS will argue over and over that you didn’t send the request in time. With a CDP Hearing you have the right to judicial review and the collection action will be suspended.
If you fail to make the 30 day window, you can request a CDP Equivalent Hearing. Under IRC §6331 you have a window of one year from the time that you received the Intent to Levy Notice to ask for a CDP Equivalent Hearing. A CDP Equivalent Hearing is similar to a CDP Hearing, but with some differences. With the equivalent hearing there is no right to judicial review and the collection efforts are not suspended. The IRS may suspend the collection efforts, but it is up to their discretion. Under Reg. §301.6330-1(i)(2)Q&A 17, as added by T.D. 9291I.B.R. 2006-46, 887, a taxpayer must submit a written request for an equivalent hearing within the one-year period commencing on the date that day after the CDP notice was issued under IRC §6330.
When your request for a CDP hearing is received, you will be notified. You have the right to request a face-to-face hearing, but most hearings are conducted over the telephone. Before the hearing the Revenue Officer (RO) handling your case will send you a letter of documents that they need before you have your conference. The conference can last a few minutes to a few hours depending on the complexity of the issues at hand. When the hearing is completed the RO will issue a determination letter to the taxpayer. The determination letter will contain:
· Verification that the requirements of applicable law or administrative procedure have been met
· Consideration of challenges that the taxpayer raises to the liability
· Consideration of the collection alternatives the taxpayer has proposed
· Determination of whether the collection action or the lien filing balances the need for efficient collection of taxes with the taxpayer’s legitimate concern that the levy or notice of lien filing is no more intrusive than necessary.
Requesting a Collection Due Process Hearing provides a back door for you to appeal the amount of tax that you owe. For instance, let’s say that you were audited by the IRS, and you didn’t agree to what the examiner said that you owed. You waited too long to file an appeal, but you filed for a Collection Due Process Hearing, when it was time. You appeal the amount that you owe, because you don’t agree with the audit. In short; you get that appeal. However, the main reason to file for the request is to stop collection action, and prevent a lien from being filed.
For more information visit www.smalleynco.com
If you have any questions you can email Craig W. Smalley E.A.
Author of the books: It Starts With an Idea – Tax Tips for Small Businesses available on Nook and Kindle, The Ultimate Real Estate Investor Tax Guide, available on Nook and Kindle, The Complete Guide to the New Tax Law – American Taxpayer Relief Act of 2012 available on Nook and Kindle, Everything You Wanted to Know about the IRS – Audits, Appeals and Collections available on Nook and Kindle, Tax Avoidance is Legal! The Complete Guide to Individual Income Tax available on Nook and Kindle, and The Complete Guide to the Affordable Care Act’s Tax Provisions available on Nook and Kindle