What is an IRS Collection Due Process Appeal?

The IRS offers various levels of appeal to taxpayers with respect to a potential balance due. Additionally, taxpayers have the right to exercise a set of appeal rights regarding IRS enforcement actions - both prior to and after the action has been taken.

The two main appeal provisions of the IRS are Collection Due Process and the Collection Appeals Program. This article will focus on Collection Due Process (CDP).

A CDP appeal is requested via Form 12153, Request for a Collection Due Process or Equivalent Hearing. This form is sent to taxpayers in conjunction with certain actions that can be appealed through this program.

The following actions can be appealed through CDP:

After a Notice of Federal Tax Lien was filed

A Federal Tax Lien arises once an assessment has been made and after a period of time passes where the IRS has made notice and demand for the collection of the assessment. The Notice of Federal Tax Lien is what makes this balance secured and public. The Lien attaches itself to any real property a taxpayer may own or acquire.

Accompanying the Notice of Lien will be Form 12153. If you feel that the IRS has filed the Notice of Lien in error, or if you are concerned about the lien filing in relation to its impact on the sale of property, you can request the appeal.

Although the IRS generally only releases a lien when the balance is paid in full, you may be eligible to have your lien subordinated or withdrawn, or have a parcel of property discharged from the lien. The instructions attached to the 12153 discuss these in detail.

A Final Notice of Intent to Levy has been received

Prior to the IRS issuing a levy on income or bank accounts, a Notice of Intent to Levy and Notice of Your Right to a Hearing is sent to a taxpayer. This is a certified letter, requiring signature at the post office. The Form 12153 is sent with this letter as well.

If you disagree with the balance, or if you would like to propose a collection alternative, you may do so via the CDP appeal.

Per the form, a taxpayer may request a CDP appeal because they cannot make payment on their taxes at this time due to being on a fixed income or because they are unemployed or due to a medical condition or other hardship.

Although the IRS will take these factors in consideration outside of the CDP appeal, if you have procrastinated in addressing your tax balance and the IRS has been obligated to consider enforcement action, IRS Office of Appeals may consider freezing collection action until your circumstances improve.

A Notice of Jeopardy Levy and Right of Appeal has been served

A jeopardy levy arises when a jeopardy assessment has been made. This situation may arise when a taxpayer is moving to defeat or shield certain assets from the government's reach. If a taxpayer is attempting to pass property off through a Quick Claim deed, or moving money into illegal tax shelters, a jeopardy levy may be immediately enforced by an IRS Revenue Officer.

A Notice of Levy on Your State Tax Refund has been issued

The IRS partners with most states for the offsetting of state refunds and overpayments to federal tax debt. If your state refund has been applied to your IRS debt, you may also request a CDP appeal via this form.

Timeframe to request an appeal

Your request for a CDP hearing must be postmarked within 30 days after the date one of the above actions has occurred or within 30 days from the date of the Notice of Lien or Notice of Levy.

If more than 30 days have elapsed, you may still request the appeal, but the IRS will consider the appeal an equivalent hearing.

Per the Form 12153, an equivalent hearing request does not prohibit the IRS from issuing a levy, nor does it suspend the 10-year period for collecting your taxes as a normal CDP appeal does. Also, under an equivalency hearing, you cannot go to court to appeal the IRS Office of Appeals' decision about your disagreement.

More from this Contributor:

Can't pay your tax bill? You may qualify for non-collectible status

How to appeal an IRS notice