The IRS Appeals Process for collections began in 1998 with the IRS Restructuring and Reform Act.  As a result of this law, taxpayers were no longer at the mercy of the IRS.  The new rules prohibited the IRS from levying bank accounts and garnishing wages at will.  And a formal appeals process was instituted to ensure that every taxpayer had the right to have their case heard in an impartial setting by an independent office.

Nevertheless, very few taxpayers exercise their appeals rights each year. This is probably due to the fact the most taxpayers do not understand the tax appeals process.

In this article we will discuss the Appeals Process of the Internal Revenue Service and the benefits that appeals can provide when dealing with the IRS.

IRS Agents and IRS Appeal

Let’s begin with the IRS employees who can help you with a problem.

Revenue Officers

Revenue Officers are the collection personnel who take collection action against taxpayers.  Generally these are the people who you get on the phone when you call the IRS about a tax debt. Typically, their understanding of tax law is more general in nature.

Settlement Officers or Appeals Officers

Settlement Officers or Appeals Officers are the appeals professionals at the IRS who handle collection matters at the independent office of appeals. Most, if not all, Settlement Officers and Appeals Officers served as Revenue Officers prior to joining IRS Appeals. They are usually bright, talented and dedicated employees with a strong understanding of tax law.

The Settlement Officers in the independent office of appeals work separately from IRS examination (the auditors) and IRS collections (those who have the job of collecting back taxes). The job of this IRS employee is to give a fresh look to tax controversies in light of tax law.

Appeals officers are able to address a wide variety of tax issues, including audits, liens, levies, wage garnishments, rejected offers in compromise and tax law. These appeals officers are experienced IRS employees specializing in tax law, providing an independent review of cases to reach fair resolutions between taxpayers and the IRS. They work out of the independent office of appeals.

What is the Fastest Way to Speak with an IRS Agent?

The IRS office phone lines are notoriously backed up.  Callers should anticipate waits of up to several hours.  And it is not an uncommon to experience a dropped call with an IRS office after a very long wait.

CPAs have a special priority service line that they can use to get to a Revenue Officer or other IRS Agent at the IRS office.  Although the taxpayer will probably have to pay for the time of the CPA to handle the matter, this remains the fastest way to speak with an IRS Agent.

IRS Final Notice of Intent to Levy

The Final Notice of Intent to Levy is the culmination of a long series of notices sent by the IRS to the taxpayer over a period of many months.  The Notice is sent to the taxpayer by certified mail.  It comes in three versions: Letter 11, CP-90 or Letter 1058, depending upon the department at the IRS that issued the Notice.

The Final Notice of Intent to Levy indicates that the taxpayer has 30 days to request a Collection Due Process Hearing at the office of appeals. This is also called a CDP Hearing and is led by an appeals officer.   The request is made by submitting IRS Form 12153, Request for Collection Due Process Hearing with the office of appeals.

I nearly always advise my clients to request a CDP Hearing with an appeals officer.

IRS Notices Stop

Once the taxpayer has requested a Collection Due Process hearing with the office of appeals, all IRS collection activities will stop.  This means no more correspondence and notices from the IRS during the period of the appeal.

Appeals conferences and appeals cases are fairly relaxed and should not be viewed as scary experiences. The appeals officer is meant to be fair and impartial.

Upon receipt of Form 12153, the IRS will forward the taxpayer’s case to a Settlement Officer to work out a resolution.   An appeals officer who is fair and impartial will be assigned to the case. This is very beneficial to the taxpayer, as the negotiation process in IRS Appeals is generally quite effective.

We find that the appeals officer to be the most efficient IRS employee when it comes to resolving tax disputes.

US Tax Court: Protecting Your Rights in Tax Court

It is important to note that the request for a CDP Hearing ensures the taxpayer’s rights to take the case to US Tax Court.  This is an important right in the event that the taxpayer wishes to challenge the ruling of the Settlement Officer at the IRS independent office of appeals.

For this reason, I generally advise clients to request a CPD Hearing and protect their right to go to US Tax Court.

IRS Appeals Process: What to Do While Waiting

While waiting for the IRS Appeals Hearing, the taxpayer should use the time to prepare any missing returns and supporting documentation for the case files. They should also develop a proposal to negotiate the tax debt, especially if dealing with complex technical collection issues.

What Else Is Needed to Resolve Tax Disputes in Appeals?

While waiting for appeals, taxpayers should prepare all missing returns in order to have their request for appeals accepted. Specifically, the IRS appeals office will require the last six years of returns, not all returns going back to the beginning of time.

In addition, the taxpayer should use the time while waiting for appeals to start to ensure that they are compliant with the tax laws about quarterly estimated taxes. This generally applies to business owners and independent contractors. The IRS appeals office will not consider taxpayers who are not current with their quarterly taxes.

If the taxpayer has not been sending in quarterly taxes, they should catch up on the missing payments as soon as possible, as required by law. Separate payments should be sent to the IRS for each quarter of the current year. This can be done on the IRS website or by mail using Form 1040-ES.

The same is true for businesses: the IRS appeals office will not consider businesses that are not making their payroll tax deposits as required by law. The business will need to catch up and pay whatever payments are missing for the current year.

The Appeals Hearing with an Appeals Officer

Once the appeals hearing has been scheduled, the taxpayer will need to submit the following supporting documentation prior the the hearing:

• Any unfiled tax returns
• Proof of filed tax returns
• Proof of compliance regarding current tax payments (copies of checks)
• Collection Information Statement (Form 433), which is a detailed financial disclosure with all facts presented and any other additional information required. Unique factors and circumstances of the case should also be presented.
• A proposal to resolve the tax matter, based on all factors and circumstances.  This refers to one of IRS Tax Relief Programs and may include an Offer in Compromise, an Installment Agreement or request for uncollectible status.

 

The submission of documents to appeals should be a complete package that leaves nothing to chance.  It will demonstrate that the taxpayer qualifies for both an Appeal Hearing as well as the Tax Relief Program that they desire.

The hearing is generally done by telephone or by video conference.

At the hearing, the taxpayer or their representative will have the opportunity to make their case and discus their dispute. The appeals officer should give careful consideration to the dispute and to all documents submitted.

Notice of Determination: Final Decision

After the hearing, the Settlement Officer will issue a Notice of Determination.  If the taxpayer agrees, they will be asked to waive their rights to go to US Tax Court.  This is routine.  If the taxpayer will disagree with the Notice of Determination, they have 30 days to file their case in US Tax Court.

The objective of the IRS Office of Appeals is to reach a fair settlement that resolves tax disputes between taxpayers and the government without litigation.

Equivalent Hearings

If a taxpayer misses the 30-day period to request a Collection Due Process appeals hearing, they have one year to request an Equivalent Hearing.  An Equivalent Hearing is similar to a Collection Due Process Hearing, but it does not give the taxpayer the right to go to US Tax Court.  In other words, the decision of the Settlement Officer is final.

Also, unlike Collection Due Process, the Equivalent Hearing does not stop IRS collection activity.  Levy action on bank accounts and other assets, as well as wage garnishments, may continue during the Equivalent Hearing process.  Therefore, the taxpayer will continue to work with IRS Collections while waiting for an Equivalent Hearing.

Collection Appeals Process (CAP)

Another type of appeals is called Collection Appeals Process (CAP Appeal). This is used primarily to resolve tax controversies with the government and untangle administrative errors within the IRS relating to cases in an expedited fashion. For example, levies issued to the wrong taxpayer would be a good case for CAP Appeals.

The CAP process is very useful to quickly correct collection activity that appears to be improper and assistance is required.

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To conclude, taxpayers should be aware of their rights under the IRS Appeals Process.  When faced with a threat of a tax lien, a tax levy or any other form of tax pain or embarrassment, the IRS Appeals Process is a great way to get a tax dispute settled quickly.

Generally, IRS Appeals is reasonable and negotiations go well.  Don’t be afraid of Appeals. It is a very useful tool for the taxpayer who is trying to battle with the government over a tax dispute or tax debt that they cannot pay.

For more information about the tax and accounting services we provide, visit our Website.

If you want my team and I to handle your tax dispute for you, click here.

Feel free to email me directly at gary.massey@masseyandcompanyCPA.com.

Massey and Company CPA is a boutique tax and accounting firm serving individuals and small businesses in Atlanta, Chicago and throughout the country.  Our services include tax return preparation, tax planning for businesses and individuals, IRS tax problem resolution, IRS audit issues, sales tax audit matters, and small business accounting and bookkeeping.