Tax Controversy & Resolution: Appealing IRS Collection Considerations
Appealing an IRS Collection
In addition to appealing the findings of an IRS audit, you may also appeal an IRS collection decision through the Office of Appeals. Depending upon each individual taxpayer's facts and circumstances, almost any collection action taken by the IRS can be appealed including:
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(Rejection) Installment Agreements
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Levies
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Liens
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(Rejection) Offers in Compromise
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Proposed Trust Fund Recovery Penalty
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Denied request to abate penalties (i.e., late payment, late filing, or deposit penalties).
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Seizures
As described in IRS Publication 1660 (Collection Appeal Rights), there two procedures a taxpayer may initiate in order to appeal collection actions:
(1) Collection Appeals Program (CAP)
CAP is both broader in scope and typically more expedited than CDP. However, if you disagree with a binding CAP finding, you have NO additional recourse. CAP is available for taxpayers subject to the following actions:
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Levies and property seizures, before or after being initiated by the IRS.
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The IRS can’t levy until 30 days after the rejection or termination of your agreement. If you appeal within the 30-day period, the IRS will be prohibited from levying until your appeal is completed.
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Notice of Federal Tax Liens, before or after being filed by the IRS.
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The rejection, termination or proposed termination, or modification or proposed modification of an installment plan.
(2) Collection Due Process (CDP)
CDP generally takes more time than CAP, but the benefit is that if you disagree with a decision, you STILL have the option to go to court. CDP hearing by Appeals is available for taxpayers who have received the following:
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Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing
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Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
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Notice of Jeopardy Levy and Right of Appeal
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Notice of Levy on Your State Tax Refund - Notice of Your Right to a Hearing
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Post Levy Collection Due Process (CDP) Notice
In general, to request a CDP with the Office of Appeals, the taxpayer must complete Form 12153, Request for a Collection Due Process or Equivalent Hearing, or other written request with the same information and send it to the address shown on your notice. You must identify your alternatives to, or your reasons for disagreeing with the action.
IRS Collection Appeals: Additional Considerations
How Do I Start an IRS Collections Tax Appeal?
Procedures to initiate a Tax Appeal include:
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Filing a Protest to the IRS findings subsequent to a Tax Audit.
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Filing a Protest in the face of a tax collection action such as a tax lien or levy.
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Filing a Petition to Tax Court.
Generally, upon your request to Appeal, the IRS will stop collection action – (Lien, Levy and Seizure) on the tax periods Appeals is considering, unless the IRS believes the collection of the tax is at risk. However, the IRS does have grounds to void an Appeals Decision when providing false information, failure to provide all pertinent information or fraud is incurred.
Do interest and penalties stop while appeal is pending?
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Interest and certain penalties will continue to accrue during the Appeals process and during any subsequent Appeals to the Courts on any amount not paid. Interest on a deficiency, can become a significant portion of the total amount due, especially where a case is open for years. Interest begins running on the due date for the year in issue and the IRS has three years from the filing date to adjust the amount of tax due.
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A taxpayer can stop the running of interest by paying the asserted deficiency or by depositing all or part of the amount at issue. A deposit stops the running of interest and does not deprive the Tax Court of jurisdiction. However, the taxpayer will not receive interest on the deposit even if he prevails in Tax Court.
How the appeals process ordinarily concludes?
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The appeals conference ordinarily concludes with a mutually agreed settlement negotiation that takes place face to face with the Appeals Officer on the spot. The Appeals Officer then proceeds to write up the terms negotiated on IRS Form 870, Consent to Proposed Tax Adjustment. It can often take several months before this documents is received in the mail by the taxpayer.
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Once you sign IRS Form 870, you agree to pay the amount of the settlement and are prohibited from subsequently challenging the included settlement terms in Court. If you feel the Form 870 was prepared in error in that it does not contain the terms you agreed to, don’t sign it. You can then proceed to litigate the issue if need be in Tax Court.
Do I Have Any Other Options Besides Going To Appeals Or Tax Court To Resolve My Tax Controversy?
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If you decide to forgo Appeals for Tax Court instead, note if the Tax Court determines that your case is intended primarily to cause a delay, or that your position is frivolous or groundless, the Tax Court may award a penalty of up to $25,000 to the United States in its decision.
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If your claim is for a refund of any type of tax, you may take your case to your United States District Court or to the United States Court of Federal Claims. Generally, your District Court and the Court of Federal Claims hear tax cases only after you have paid the tax and filed a claim for refund with the IRS.
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To retain your right to go to court, you must request a CDP hearing within the time period provided by law. Your request for a CDP hearing must be sent to the address on the lien or levy notice and postmarked on or before the date shown in the lien notice or on or before the 30th day after the date of the levy notice. Your hearing may consist of an in-person or telephone conference and one or more written or oral communications. Generally, there will be no levy action during the period of your request to a hearing from a lien notice and during the CDP hearing.