The IRS must inform the taxpayer of their constitutional right to a hearing and cannot proceed with any collection action against a taxpayer until they have been given the opportunity to exercise this right. A taxpayer can exercise their due process right to have a Collection Due Process hearing before the IRS can levy any monetary funds or seize assets, or after a Notice of Federal Tax Lien is filed. A CDP hearing is an administrative hearing that can be conducted face-to-face with an IRS Settlement Officer or telephonically. Generally, the purpose of the hearing is to discuss any procedural issues that may not have been followed by the IRS or propose other collection alternatives to the proposed levy action. Collection alternatives could be an offer in compromise, installment agreement, or currently non-collectible based on the taxpayer’s inability to pay.
If a timely request for a Collection Due Process Hearing has been filed. The taxpayer will receive notification that their request will be forwarded to the IRS Appeals Office and the taxpayer should be contacted by the IRS Appeals Office within 60-90 days. During this time, it is important to get in compliance with tax filings, estimated tax payments, and federal tax deposits. If the taxpayer is not in compliance, the IRS Settlement Officer will not discuss the merits of the collection case because no other collection alternatives are available until the taxpayer is in compliance.
Generally, IRS Appeals will send a letter to the taxpayer which informs the taxpayer about the appeals process and provide the taxpayer with the name and contact information of the person in Appeals that has been assigned to the case. Thereafter, usually within 30-days, the IRS Settlement Officer will send a letter to the taxpayer scheduling the hearing and requesting documentation prior to the hearing date. If the appeal was filed on the “Final” Notice of Intent to Levy, LT-11, the IRS will request the taxpayer’s financial information in order to determine their ability to pay the IRS.
Assuming there are no compliance issues, and the financial documentation was provided to the IRS prior the hearing date, the hearing can be conducted rather quickly. The IRS will verify the taxpayer’s compliance, verify whether there were any procedural issues, and whether the IRS will accept taxpayer’s proposal on a resolution. If the parties agree to a resolution, the Settlement Officer will request that the taxpayer to sign a waiver of their appeal rights to Tax Court. This is standard procedure, since the parties have an agreement, there is no need to file another appeal.
However, if the parties do not reach an agreement, the Settlement Officer will issue a Notice of Determination. The Notice provides the taxpayer 30-days to file a petition with the United States Tax Court. If a petition is not filed with the Tax Court, the case will be transferred back to IRS Collections; either to the Service Center or to a Revenue Officer. The taxpayer will have the opportunity to resolve their account with IRS Collections.