Posted by Raven Skylar Tax & Consulting, LLC

Understanding IRS Collection Due Process

Understanding IRS Collection Due Process

What is a collection due process?

If you have an unpaid debt with the Internal Revenue Service (IRS) that has not been settled, the IRS may conduct collection activities. The IRS uses two main types of collection activity against individuals: Federal Tax Lien Notification (NTFL) and filing a bank levy. The IRS may also require enforcement, which is a type of tax.

If you disagree with the amount of tax that the IRS claims to owe and act promptly, you can file a request for collection due process (CDP) and stop collection activities by awaiting the CDP hearing, but time is of the essence.

What is a collection due process request?

Under Section 6320 of the Internal Revenue Code, you are entitled to a request to be heard before an impartial officer when the IRS has filed a federal tax lien against you or has notified you of the intention to file a lien against you. The two main types of IRS letters are:

• IRS Letter 3172: Notice of Federal Tax Lien File and Your Rights to a Hearing; or

• IRS Letter 1058: Notice of Intent To Levy and Notice of Your Right to a Hearing

After receiving a notice from the IRS regarding notice of levy or lien, you usually have 30 days from the date of the letter to file a collection due process request.

What is a Federal Tax Lien Notice?

A federal tax lien can have serious consequences. Indeed, if the lien relates to your home, it can be very difficult to refinance a home. Plus, it can scare off potential buyers by preventing them from buying your home, as anything IRS-related has a way of instilling fear into everyone in your path. If the buyer finds out about the lien during a title search of your home, they might bail on you.

The only good thing is that the IRS, in general, cannot "force the sale" of your property; Instead, once the property has been sold (or mortgaged), the IRS can try to take money out of it.

What is a Notice of Intent to Levy?

A notice of levy is a bigger problem because it can have an immediate financial impact on your life. If you receive a notice of intent to levy your bank account, the IRS will attempt to confiscate your funds from your bank account immediately. If you disagree with any part of the debt that the IRS claims to have, you must file a collection due process request within 30 days of receiving the notice. This is because once the levy has been issued on your bank account, the IRS can withdraw any money you have in your account to pay off the tax debt (although once the levy is posted, you will still have 21 days to try to get the levy removed).

Remember that if the IRS charges a lot of money for any reason, it is your responsibility to request a refund from the IRS. If you think the IRS usually doesn't respond, try to get a response from the IRS when you request a refund.

How does the collection due process appeal process work?

Normally, the collection due process appeal process (or an equivalent hearing) takes between 3 and 12 months to be resolved. To request a collection due process hearing, you must complete Form 12153, request for a collection due process or equivalent hearing, with the designated revenue officer (or, if you do not have a designated revenue officer, the IRS service that issued the completion.). Once you have requested the collection due process appeal, you will need to:

  • Complete a Collection Information Statement (IRS Form 433-F): This form will ask you for your monthly income and expenses, as well as the value of any assets you own, such as bank accounts, real estate, stocks, etc.

  • Create an alternative proposal to the enforced collection for the IRS appeals officer to review. This alternative generally takes one of the following three forms: a payment plan, an offer in compromise, or a currently not collectible (CNC).

Over time, you will meet and speak directly with an IRS resource officer. As mentioned earlier, these officers enjoy a high degree of flexibility and independence from most IRS agents. Appeals officers can approve decisions that other agents cannot.

How do I file a collection due process request?

You can prepare and submit a collection due process request on IRS Form 12153. This form asks you to provide basic information about yourself, as well as the reasons why you think the IRS should not pursue the lien or notices of intent to levy against you. 

If the form is not completed correctly, it will be rejected, and note that the IRS is still looking for a way to reject your form.

How long do you have to file the Collection Due Process request?

Thirty days from the date of the letter. This is a very strict requirement, and if you do not submit your request within 30 days, you will lose your right to the collection due process hearing request. If the collection due process is filed on time, the IRS must stop collecting the debt amount pending the hearing outcome.

If you miss the 30 days, you can still request an "equivalency hearing," but the IRS is allowed to process the debt it owes you while the hearing is in progress.

Where do you file the IRS Form 12153?

There is no specific department to file the 12153 collection due process form to. Instead, the form is usually sent to the address listed in the federal tax lien notice or notice of intent to collect that you received in the mail.

  • Before submitting the completed Form 12153, you must contact the IRS service identified in the Notice of Intent to Levy or Notice of Federal Tax Lien in order to confirm with the IRS if there is a specific person to contact.

  • In addition, you should request a copy of the department's fax number so that you can fax the application as well, although it is often not provided.

While it may seem like a David and Goliath moment when you're battling the IRS, requesting a collection due process is a great way to fit into the playing field that gives taxpayers the ability to stop collections on debts while waiting for the collection due date request hearing.



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