Learn about your rights to IRS tax appeals!
The availability of IRS appeals means that taxpayers are not at the mercy of the IRS. The staff of the IRS collections division is not able to levy bank accounts and garnish wages whenever they like. The appeals process limits the power of the IRS.
However, 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 attempt to inform the public about their rights to tax appeals and the benefits that appeals can provide when dealing with the IRS.
Collection Due Process Appeals
Taxpayers have the right to a Collection Due Process appeals hearing when a Notice of Federal Tax Lien is filed or when the IRS issues a final notice of threat to levy assets. In either case, the taxpayer has 30 days to request a Collection Due Process appeals hearing.
The request is made by submitting IRS Form 12153, Request for Collection Due Process Hearing.
Once the taxpayer has requested a Collection Due Process hearing, all IRS collection activity (notices and levies) must stop for the tax years in question. Collection activity may continue for years on which the taxpayer’s appeals rights have expired. In that case, the taxpayer will need to work on their case with both IRS Collections and IRS Appeals.
Upon receipt of Form 12153, the IRS will forward the taxpayer’s case to an Appeals Officer or Settlement Officer for review. This is very beneficial to the taxpayer, as the negotiation process in Appeals is generally quite effective.
While waiting for the Appeals hearing, the taxpayer should prepare any missing returns and develop a proposal to negotiate the tax debt. Taxpayers must have all missing returns filed in order to have their request for appeals accepted.
It is important to note that the request for a Collections Due Process appeals hearing ensures the taxpayer’s rights to take the case to Tax Court. This is a significant benefit to the taxpayer.
The Appeals Hearing
Once the hearing has been scheduled, the taxpayer will need to submit the following prior the the hearing:
- Any unfiled tax returns
- Proof of compliance regarding current tax payments
- Collection Information Statement (Form 433), which is a detailed financial disclosure
- A proposal to resolve the tax matter
The hearing is generally done by telephone. However, an in person hearing may be approved.
At the hearing, the taxpayer or their representative will have the opportunity to make their case.
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 Tax Court. If the taxpayer does not agree with the Notice of Determination, they have 30 days to file their case in Tax Court.
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 Tax Court. 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.
Collection Appeals Process (CAP)
Another type of appeals is called Collection Appeals Process (CAP Appeal). This is used primarily to untangle administrative errors relating to cases in an expedited fashion, such as levies issued to the wrong taxpayer.
The CAP process is very useful to quickly correct collection activity that appears to be improper.
To conclude, taxpayers should be aware of their rights to appeal. When faced with a tax lien or tax levy, it is a great way to get a case settled quickly. Generally, appeals is reasonable and negotiations go well. Taxpayers should not be afraid of appeals. It is a very useful tool for the taxpayer who is trying to battle with the IRS over a tax debt that they cannot pay.
You are welcome to listen to our YouTube video on IRS appeals at this link.
Founded by Gary Massey, Massey and Company CPA is a boutique accounting firm located in Atlanta providing tax and accounting services to small businesses and individuals throughout Georgia.