You have many options to challenge the IRS’s efforts to collect tax, penalties, and interest. Two common procedures are the Collection Due Process (CDP) hearing and the Collections Appeal Program (CAP) hearing, depending on the circumstances.
The CDP program gives you the right to appeal the filing of a notice of federal tax lien (I.R.C. § 6320) or the right to request a hearing in response to a notice of intent to levy (I.R.C. § 6330). Two exceptions to the IRS notice requirement are when the collection of the tax is in jeopardy under I.R.C. § 6331(a) and when the levy is made on the state for a state tax refund. In those cases, you should receive a Post -Levy CDP Notice giving you appeal rights. IRM 5.1.9.3.1(4).
The request for the hearing must be in writing; be made within 30 days of the date of the notice of intent to levy and notice of your right to a hearing or within the 30 days beginning with the day after the five-business-day period of the filing of the notice of federal tax lien; and, be signed by you or your representative. IRS Form 12153, request for collection due process hearing, is available for this procedure, but it is not required. IRM 5.1.9.3.2
If your request is timely, levy action must be suspended during the appeal period and while any further appeals to the tax court or district court are pending, except in the case of state refund levies, jeopardy levies, or if the IRS receives leave from the court to continue the levies. Review IRM § 5.1.9.
If the request for a CDP hearing is made after the 30-day notice period, but within one year of the notice date, you will still be given an independent review of the collection action by an appeals officer. This is known as an equivalent hearing. However, your rights are different. The appeals officer’s decision will be final. The decision will not be appealable to the tax court, except as the issues relate to spousal defenses under I.R.C. § 6015. The levy action need not be suspended during an equivalent hearing. However, as a general rule, it is often suspended. But, if the revenue officer determines that collection is at risk, like when you are dissipating assets, levy action can continue. IRM 5.1.9.3.5.1(2)
During the hearing, (either a CDP Hearing or Equivalent Hearing) you may raise any relevant issues, including appropriate spousal defenses, challenges to the appropriateness of the collection action, and offers of collection alternatives which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer in compromise. You may also offer evidence of hardship and challenge the underlying tax if you did not receive a statutory notice of deficiency for the tax liability or did not otherwise have the opportunity to dispute the liability.
You may not raise an issue that was previously considered at an earlier I.R.C. § 6320 hearing or any previous administrative or judicial hearing and the person seeking to raise the issue meaningfully participated in the hearing.
The CAP program gives you the right to appeal the IRS’s actions in a wider variety of areas. To receive a CAP hearing, you must first discuss the case with the revenue officer’s manager (IRM 5.1.9.4.2), except when appealing certain installment agreement issues (IRM 5.1.9.4.2(7)). If the issue is not resolved, you can then file a written request to have the matter reviewed by an appeals officer. You can use Form 9423, collection appeal request. The goal of the appeals office is to resolve CAP cases within five to fifteen business days. (IRM 5.1.9.4.4) The appeals officer will attempt to have a conference with you within two days of receipt of the case. Unfortunately, unlike a CDP Hearing, the appeals officer will not have control of the file. He or she will just be reviewing the actions of others to determine if they were taking defensible actions within their authority and in the best interests of the Internal Revenue Service. If the appeals officer sustains the collection actions, enforcement action may resume when you receive verbal notice of the decision, unless otherwise prohibited.
Through the CAP program, you may appeal the following issues:
1. Rejected installment agreement. You have 30 days after the request for an installment agreement is denied, to request an appeal. During this time, plus 15 days to allow for mailing and receipt of request, levy action is prohibited.
2. Defaulted/proposed termination of installment agreement. You have 30 days to request an appeal after termination of an installment agreement is proposed. During this time, plus 15 days to allow for mailing and receipt of request, levy action is prohibited.
3. Terminated installment agreements. You have 30 days to request an appeal after an installment agreement is terminated. During this time, plus 15 days to allow for mailing and receipt of request, levy action is prohibited.
4. Lien issues. You can also use this procedure to appeal the filing or proposed filing of a notice of federal tax lien (NFTL), the denied requests to withdraw the NFTL and denied discharges, subordinations, and non-attachments of a lien.
5. Third-party issues. Third-party claims to property and alter ego and nominee liens are also appealable under CAP.
6. Seizure actions. You can appeal a seizure action within 10 business days of date the notice of seizure is provided to you or left at your usual place of abode or place of business.