A Collection Due Process (CDP) hearing, Form 12153 provides taxpayers the opportunity to go to appeals on either a final notice of federal tax lien or a proposed or actual levy. The problem with filing a CDP on the notice of federal tax lien is that the lien has already been filed with the County Recorder’s Office and is public record. Unfortunately, with a CDP, the taxpayer can exercise their appeal rights after the notice of federal tax lien has been issued. If the Collection Due Process appeal is filed within 30-days, it is a timely CDP Hearing which protects the specific tax periods from any further collection action until the taxpayer has the opportunity to be heard. It also preserves the taxpayer’s right to file a petition in Tax Court if he/she does not agree with IRS Appeals’ determination.
However, if the request for a hearing, Form 12153 is filed on the 31st day, or any time up to one year, the request for an appeal becomes an Equivalency hearing. The taxpayer’s case will still be forwarded to appeals and the taxpayer can request collection alternatives. However, the taxpayer’s account is not necessarily protected from further collection action while they wait for their hearing. Once Appeals makes a determination, the determination is final and the taxpayer does not have the right to file a petition with Tax Court.
Like the Equivalency hearing, the taxpayer does not have the right to go to court if they disagree with Appeals in a CAP. However, unlike a CDP, a CAP allows the taxpayer to appeal the proposed action, for example, before a federal tax lien is filed. Since the taxpayer can appeal a proposed action, the IRS will process the request for CAP much faster than a request for CDP hearing. A CAP can take a few weeks, but a CDP hearing can take several months, so the IRS will toll the collection statute.
In the case of an IRS wage garnishment or bank levy, the taxpayer does not want to wait months to have a hearing with IRS Appeals. The taxpayer wants the matter resolved quickly. If the Collections Division does not want to release or modify the levy, the taxpayer can file a CAP to have their case go to Appeals. Once the case is in Appeals, the taxpayer must be prepared to show that the wage garnishment and/or bank levy is creating a financial hardship.
In the case of modifying or terminating an installment agreement, the taxpayer can exercise their appeal rights by filing a CAP, not a CDP. The taxpayer must explain why they disagree and offer a solution. The CAP will place a hold on any collections (unlike an Equivalency hearing) until IRS Appeals has made a determination. Note that once the determination is made, IRS Collections is notified within days of the decision. The taxpayer must be prepared to deal with IRS Collections, if the matter is not resolved in Appeals.