Collection Due Process Hearing (CDP) Page 147 Collection Due Process Hearing (CDP) The five events that can allow an opportunity for the taxpayer to request a Collection Due Process Hearing: Notice of Federal Tax Lien Filing – Post Lien Final Notice – Notice of Intent to Levy – Prior to Levy. Notice of Jeopardy Levy Notice of Levy on Your State Refund Post Levy Collection

Collection Due Process Hearing (CDP) Page 155 Collection Due Process Hearing (CDP) Mechanics Upon notice the taxpayer has 30 days to request statutory hearing. If the taxpayer fails to meet the 30 day window an equivalency hearing can be requested

Collection Due Process Hearing (CDP) Page 147 Collection Due Process Hearing (CDP) The advantage of a statutory hearing: IRS is barred from taking any enforcement action during the time the CDP is in process from the date of the request to date of the settlement’s offer determination plus thirty days..

Collection Due Process Hearing (CDP) Page 147 Collection Due Process Hearing (CDP) But Oops Not so for an equivalency hearing IRS is not barred from taking enforcement actions the hammer may drop

Collection Due Process Hearing (CDP) Page 147 Collection Due Process Hearing (CDP) Weiss (2016) 147 TC No. 6 IRC 6330(a)(2) and IRC 6330(a)(3)(B) indicates: Court indicated that the thirty days starts not on the date on the notice but the date the IRS delivers the notice to the mail system.

Collection Due Process Hearing (CDP) Page 147-148 Collection Due Process Hearing (CDP) What about filing a Tax Court petition in response to a negative decision? Bongam (2016) 146 TC No. 4 – IRS sent notice of determination to incorrect address. At a later date the error was corrected and mailed a second time. When is the tax court petition due? Thirty days from the date of the corrected mailing. Unanswered Question – Does that apply to the notice under IRC 6330 or 6320?

Collection Due Process Hearing (CDP) Page 148 Collection Due Process Hearing (CDP) Collection Due Process (CDP) – Statutory Right – A gift from the IRS Restructuring and Reform Act of 1998 Lien – IRC 6320 Levy – IRC 6330

Collection Due Process Hearing (CDP) Page 147 Collection Due Process Hearing (CDP) The Procedures: IRS must notify the taxpayer that the action has been filed or contemplated. Notice delivered to last known address. Notice must contain address of IRS representative taking the action. Notice must inform taxpayer of their CDP rights. Upon receipt of timely request of Form 12153 the representative is to cease all enforcement action.

Collection Due Process Hearing (CDP) Page 148 Collection Due Process Hearing (CDP) Some Limitations A hearing must be conducted before a settlement officer who has had NO prior contact of the case

Collection Due Process Hearing (CDP) Page 148 Collection Due Process Hearing (CDP) Some Limitations A hearing must be conducted before a settlement officer who has had NO prior contact of the case

Collection Due Process Hearing (CDP) Page 148 Collection Due Process Hearing (CDP) Type Here

Collection Due Process Hearing (CDP) Consider the notice and the necessary steps

Collection Due Process Hearing (CDP) Page 149 Collection Due Process Hearing (CDP) Should we or should we not? 13

Collection Due Process Hearing (CDP) Page 150 Collection Due Process Hearing (CDP) Cautionary thoughts: CDP rights are so valuable that practitioner should be careful not to make determination without client input. The ability to stop enforcement actions by IRS is important but actions have been taken by congress to curb abuses.

Collection Due Process Hearing (CDP) Page 150 Collection Due Process Hearing (CDP) But trouble for frivolous filing of CDP request: In 2006 congress included Form 12153 in the list of returns that were subjected to the frivolous return filing list subject to a $5,000 penalty.

Collection Due Process Requests Page 150-151 Collection Due Process Requests Those events leading to the ability to requests a CDP hearing

Collection Due Process Requests Page 151 Collection Due Process Requests All enforcement activity is to STOP during the consideration of a statutory CDP request: Filing date plus 30 days post date of final determination The hearing process start to finish can take as much as 3 months but on occasions as long as one year The CSED (collection statute expiration date) will stop tolling during the period.

Collection Due Process Requests Page 151 Collection Due Process Requests The taxpayer is to list all reasons that the taxpayer believes the enforcement action is not appropriate: (Page 154)

Collection Due Process Requests Page 151 Collection Due Process Requests Page 4 of Form 12153

Collection Due Process Requests Page 151 Collection Due Process Requests Reasons for filing Form 12153 Appropriateness of collection action. Collection alternatives. Spousal defenses. Is there really a tax liability? Whatever the taxpayer thinks is reasonable and wants to request. Important to list ALL defenses/reasons as failure to list may make them irrelevant.

Collection Due Process Requests Page 151 Collection Due Process Requests More process issues: Notice of assignment and scheduling of CDP request. (Page 156)

Collection Due Process Requests Page 151 Collection Due Process Requests IRS has revamped the hearing process to make it more judicial in it’s approach as part of the Appeals Judicial Approach and Culture Project (AJACP). IRM 8.22.4.2.1

Collection Due Process Requests Page 151 Collection Due Process Requests Some clarifications and changes: Issues raised or considered at a prior administrative or judicial hearing may NOT be considered. If financial information was submitted to the collection function AND investigated: Hearing Officer may only determine if collection correctly applied financial information. New information submitted will be returned to collection for verification and any additional investigation

Collection Due Process Requests Page 151 Collection Due Process Requests Planning Points – Is it in the best interest of the taxpayer to submit financial information to collection if it is likely collection resolution will occur in appeals as: If there has been no previous financial information submitted the Hearing Officer will deal with verification and accuracy.

Collection Due Process Requests Page 151 Collection Due Process Requests Some clarifications and changes: Appeals cannot return case to collection for statutory issues but must instead – Determine if relevant information should be requested from the taxpayer. Issue an appeals referral investigation to collection. Make a determination based on the information that appeals has available.

Collection Due Process Requests Page 152 Collection Due Process Requests Best Practices Insure office procedures that 12153 is filed within 30 day window. Work toward resolution during period of consideration with collection function. If 30 day window is missed file 12153 requesting equivalency hearing. No hold on enforcement. Processed on an as can basis.

Collection Due Process Requests Page 153 Collection Due Process Requests Form 12153 (Page 1) – Do not even think about faxing the Form 12153 – No statutory or regulatory guidance on what constitutes timely filing.

Collection Due Process Requests Page 153 Collection Due Process Requests Form 12153 (Page 1) – Insure ALL periods of issue are included This includes periods that did not generate appeal rights Income 1040 2006 - 2010

Collection Due Process Requests Page 154 Collection Due Process Requests Form 12153 (Page 2) – Basis for Hearing MUST have at least one box checked No downside to checking this box it can always be withdrawn

Collection Due Process Requests Page 154 Collection Due Process Requests Form 12153 (Page 2) – Do not forget the signature(s) and Note that POA signs in a special place, if taxpayer signs no POA required but note check box.

Collection Due Process Requests Page 155 Collection Due Process Requests Settlement with IRS during consideration of CDP but outside of jurisdiction of hearing officer. IRS will not enter into a collection action settlement without a withdrawal of CDP request. Process can be tricky as withdrawal will occur before IRS signs off on alternative. Thoroughly understand the rights that are being revoked.

Form 12256 Page 155

Page 155 Form 12256

The Request for Hearing is Accepted, the Taxpayer is Notified Page 158 The Request for Hearing is Accepted, the Taxpayer is Notified

The Request for Hearing is Accepted, the Taxpayer is Notified Page 158 The Request for Hearing is Accepted, the Taxpayer is Notified Insure that immediate contact is made to modify any contact or schedule

The Request for Hearing is Accepted, the Taxpayer is Notified Page 158 The Request for Hearing is Accepted, the Taxpayer is Notified Location of CDP Conference Telephone Face to Face

The Request for Hearing is Accepted, the Taxpayer is Notified Page 158 The Request for Hearing is Accepted, the Taxpayer is Notified What do you mean they want more information? Exactly how do you want the alternative payment program to be constructed. Additional financial information. Who “investigates” the financials will be based on prior account activity.

The Hearing is Conducted Page 158 The Hearing is Conducted Preparation is the Key. Hearing officers are particularly attuned to the schedule. Keep your appointment or lose your shot. Call quickly if scheduled appointment will not fit into your schedule. Delivery of information discussed at the hearing must occur promptly or hearing officer will disregard.

The Hearing is Conducted Page 158 The Hearing is Conducted Preparation is the Key.. While discussion is informal, the process is not, review IRM 8.22.4 to fully understand hills, curves and road hazards. Collection Due Process Appeals Program Image courtesy of http://www.irs.gov/irm/part8/irm_08-022-004.html

The Request for Hearing is Accepted, the Taxpayer is Notified Page 158 The Request for Hearing is Accepted, the Taxpayer is Notified Can the Tax be Protested in a CDP Hearing? Maybe Did the taxpayer have an opportunity in the past to dispute the tax? Smith, TC Memo 2016-186 Outcome – IRS had followed statutory procedures and the taxpayer had declined to protest the SND. Too Bad, So Sad – Taxpayer must prove they were not afforded an opportunity of dispute.

The Determination/Decision Page 158 The Determination/Decision The hearing officer will generally share their determination with you prior to the official: Notice of Determination Present additional information to hearing officer that further supports your case. Discuss background of determination if you do not agree. This is appeals, the officer will view themselves in a judicial manner and pride themselves on independence, but do not expect them to make new law.

The Determination/Decision Page 159 The Determination/Decision

Collection Due Process Hearing Page 159

Chapter 6: Collection Appeals Page 159-160 Frivolous Hearing Requests Under IRC 6702 IRS can assert that a CDP hearing request is frivolous and seek a penalty of $5,000. Do not file CDP for sole purpose of delay. Be cautious of “boiler plate” language when filing or support documents. File request that is a rehash of prior administrative proceedings. Conferee schedules are increasingly overloaded and they seem to be looking for reasons to “throw out a case”. Chapter 6: Collection Appeals

Other Issues Filing an Offer in Compromise During a CDP Hearing. Page 160 Other Issues Filing an Offer in Compromise During a CDP Hearing. CDP Requests when a Federal Tax Lien is Filed. NO Pre-Levy CDP hearing for Certain Federal Contractors Ex parte communications & Independence

Collection Appeals Program (CAP) Page 160-161 Collection Appeals Program (CAP) Available for: Notice of Federal Tax Lien Notice of Levy Seizure of Property Denial or Termination of IA Denied Offer in Compromise Proposed Trust Fund Recovery Penalty Misc Penalty Proposals if Abatement Denied Chapter 6: Collection Appeals

Collection Appeals Program (CAP) Page 161 Collection Appeals Program (CAP) But not for: Trust Fund Recovery Penalties Offers in Compromise Penalty Appeals Jeopardy Levies Audit Reconsiderations General Claims

Collection Appeals Program (CAP) Page 161 Collection Appeals Program (CAP) Filing an appeal should be done through the IRS employee handling the case indicating the taxpayer is exercising the CAP rights The employee must make the referral to a manager and if unresolved file Form 9423

Collection Appeals Program (CAP) Page 161 Collection Appeals Program (CAP) Form 9423 must be filed within two – ten days of conference with collection manager, except for denial of IA which has 30 days. Disagreement is not a basis, solutions must be offered Enforcement is stayed during consideration Decisions are binding on IRS and TAXPAYER NO JUDICIAL REVIEW IS AVAILABLE

Collection Appeals Program (CAP) Page 161-162 Collection Appeals Program (CAP) Scheduling the Conference Discover any particular concerns the appeals officer may have Request and prepare a response to the examiner’s rebuttal Look at case file and if not provided make a FOIA request for administrative file.

Collection Appeals Program (CAP) Page 162-163 Collection Appeals Program (CAP) Conference Strategies It is not about winning it is about settling the matter There are no rules of evidence – submit everything that supports your case When appropriate submit a written offer Chapter 6: Collection Appeals

Collection Appeals Program (CAP) Page 164 Collection Appeals Program (CAP)

The Appeals Program The appeals programs for exam and collection are an effort to solve taxpayer disputes at a lower level than tax court. By a show of hands: Our firm does not do appeals work. We do some appeals work but concerned the process is complicated and difficult to deal with. Have only worked with collection appeals (CDP) Have only worked with exam appeals. Are frequently working with appeals officers. 06: Collections Appeals