Category Archives: Collection Due Process hearing

Innocent Spouse Tax Attorney Podcast

By   November 11, 2015

If you are considering filing an Innocent Spouse Request with the IRS, hiring an Tax Attorney with experience in Innocent Spouse Relief matters is in your best interest.

 

Schedule a phone call with Thomas S. Groth, Esq

We decided to do a podcast about Innocent Spouse Relief.

 

I recently had the pleasure of talking with Attorney Anthony Parent over at IRSMedic: Parent & Parent LLP on his up-and-coming (and entertaining) tax podcast “Parental Advisory: The Show”. It was a great experience. We might have gotten a little off-track at first, talking about the Connecticut Department of Revenue Services and how they like to put pressure on individuals taxpayers by charging them personally as criminals when they fall behind on state taxes. (Even though they can’t actually do that in some cases, they still do.)

Though we did not get into too much of the nitty-gritty of Innocent Spouse Relief under Revenue Procedure 2013-34, we did discuss some high points of what to do, and – more importantly what not to do when filing a claim for Innocent Spouse relief under the “equitable relief” provisions of Internal Revenue Code 6015(f).

Continue reading »

“What reasons can I use to request a CDP hearing?”

By   March 29, 2015

When filing for a CDP hearing, it is important to make sure that you request the hearing in a way that ensures the IRS does not dismiss your Form 12153 (or a request in similar form) outright as frivolous before you have a chance to be heard.

 

schedule a phone call with Attorney Thomas S. Groth, Esq

In order to do that, you will want to make sure that you use a valid reason to request a CDP hearing. However, in making the initial request for a hearing, you should also avoid making the basis of your request too narrow – the IRS may try to hold you to the basis for your request even if your circumstances or arguments change between the time you request the hearing, and the hearing takes place. Don’t feel like you need to check just one box, or that you cannot fill in additional reasons for requesting the hearing – just make sure that your reasons for the hearing comply with the Internal Revenue Code and Treasury Regulations.

How to know when you have the right to request a CDP hearing.

You Owe the IRS a legally enforceable debt.

So, you owe some money to the IRS. Maybe you self-reported this income to the IRS, but could just not afford to pay the amount due on your return, maybe you were audited in some way and have yet to find the funds to pay back the government, or maybe you are stuck holding the bill for what should be someone else’s tax problem. Whatever the reason for you tax debts, if you are reading this post, it is likely that you owe the IRS some money, or you know someone who does.

When you owe a legally enforceable debt to the IRS, the government can use its extreme powers of lien, levy, and the US mail to rip any assets or income away from you – midstream, before you even get your hands on it – and apply those funds to your back taxes.

Lucky for you, though, you happen to live in the United States. And, in the United States – we have this thing called Due Process. You are entitled to Due Process before the government can take your stuff away from you.

The trick is knowing when those Due Process rights are triggered, because you have a limited time to exercise those rights to the fullest extent.

If you miss the deadline to file for a CDP hearing, you can still request an Equivalent hearing (EH). But an EH does not protect you from collection while the hearing is pending, and an EH does not allow you to appeal an adverse decision by the IRS Settlement Officer to Tax Court.

The IRS Sends you a letter

The IRS will send you a letter via certified (and usually via regular mail as well) that informs you of its “intent to levy” your property or income. Or the IRS will file a lien and send you a letter notifying you of the filing.

Previously, the IRS was using letter that made it obvious that you have a right to a hearing. However, recently the IRS has begun sending out letters that make taxpayers due process rights less obvious. It is up to you to make sure that you read every letter you received from the IRS carefully to make sure that you are not sitting on your appeal rights. IF you do not understand the contents of a letter, you should bring it to a professional who offers free consultations and who is willing to look at the letter and explain it to you.

When can someone request a CDP hearing with the IRS?

There seems to be some confusing regarding the question of when a taxpayer can request a CDP (Collection Due Process hearing). In terms of a Notice of Levy or similar notice, a taxpayer has 30 days to request a hearing. If the hearing is requested within 30-days, the taxpayer will be protected form levy action until the taxpayer has a chance to be heard by IRS Appeals, an office separate and independent from the IRS offices actually tasked with collecting tax debt.

What reasons can someone use to request a CDP hearing?

A taxpayer is entitled to request a CDP hearing to propose alternatives to forced collection action by the IRS. It is really that simple. However, if you are about to file a request for a CDP hearing, and would like someone to take a look, I urge you to give me a call at (203)628-2952 so we can discuss the right approach to filing a CDP request. If you want me to review your actual filing, to make sure you are using the right words and checking the right boxes to make your request, I am happy to do that for a small fee.

Do you need to hire a Tax Lawyer for your CDP hearing?

No. But you probably should. Too many taxpayers try to go it alone with the IRS and end up getting tricked or misled by the IRS into a “solution” that is not optimal or sustainable for the taxpayer.

In addition, it is too easy to miss something when you have never submitted an Offer in Compromise or requested an Installment Agreement with the IRS. Having a representative speak for you at an IRS CDP hearing puts distance between you and the arguments being made – adding legitimacy to those arguments, because a professional is vouching for those arguments and helped develop them.

A CDP hearing is your best shot at obtaining a fair resolution to your tax problems – and you only get one shot at such a hearing per tax year.

When do you have to file for a Collection Due Process hearing?

By   December 18, 2014

30 Days. That’s how long you have to file for a Collection Due Process hearing in response to a Levy notice from the IRS.

It used to be that the IRS was issuing for the most part – only a “Final Notice of Intent to Levy and Your Right to a Collection Due Process hearing” (Letter 1058) as the last letter before a taxpayer was exposed to a levy/garnishment of all of his assets and income. But recently, the IRS has started issuing a letter called a “lt11” – which it is pretending on its website is the same thing.  It is not. That letter (the lt11) is titled [notice of intent to levy] Intent to seize your property or rights to property. Nothing in the lt11 suggests action in the same way as the words “final notice” or “your right to a collection due process hearing,” in the Letter 1058, But I guess that’s the point. So be careful(!) and read every(!) certified letter you receive from the IRS. You might have a limited time to act before your property and income is exposed. If you would like me to review a recent notice you have received from the IRS, that is something I do that during all of my free consultations.

Click the call button below to call me now or schedule online.

or just email: groth@tom.tax

or call: 203.628.2952

 

 

 

 

///Start boring Tax Procedure Section///

Yesterday, Keith Fogg wrote a blog article over at Procedurally Taxing about the recently decided Ziegler case. In that case, the Tax Court was faced with the question of whether it had jurisdiction over a case when the IRS allowed an Appeals hearing to proceed as if it were a timely requested Collection Due Process hearing. Ziegler requested a Collection Due Process hearing by mailing the request to the IRS on July 14, 2011. Critically, this request was mailed 31 days after the date on the IRS notice giving Ziegler a right to the hearing(June 13) and 34 days after the date the FNOITL was mailed (June 10). At the end of the hearing, a Notice of Determination was issued by IRS, when the IRS should have actually issued a Decision Letter. Both of these letters have largely the same effect from an administrative perspective – they represent the decision made by IRS Appeals (generally, whether or not to proceed with the levy, or enter into an agreement with the taxpayer for a “collection alternative”).

The Court decided that it had jurisdiction over the case, because Ziegler’s Tax Court Petition was timely filed in response to a Notice of Determination. However, the Tax Court went on to convert the Motion to Dismiss for lack of jurisdiction to a Motion for Summary Judgment and granted it.

//end boring tax procedure section//

What does this case tells us about the IRS Collection Process?

Despite the boring “tax geek” flavor of this case, what it tells us about the IRS Collection Process in the context of a Final Notice of Intent to Levy is instructive.

If the IRS sends you a Final Notice of Intent to Levy (AKA a FNOITL aka cp1058 letter aka NOIL aka NIL), you have the opportunity to file for what is known as a Collection Due Process hearing. In order to file for a hearing with IRS Appeals, and retain the benefit of Tax Court review,  you have 30 Days to respond to this notice by requesting a hearing.

Benefits of timely requesting a CDP Hearing

The IRS can’t collect until the hearing is over

Filing for a Collection Due Process hearing on time has its benefits. First, the IRS is prohibited by statute from taking levy action against a taxpayer while the hearing is pending. In the Ziegler case, the FNOITL was sent on June 13, 2011 and Ziegler mailed a request for a hearing on July 14, 2011, but it wasn’t until over a year later – on September 28, 2012 – that IRS Appeals actually issued its “Notice of Determination.” This means that for the 14 months that Ziegler’s CDP hearing was pending the IRS could not collect against him for the year at issue. (Now in this case, the IRS actually could have collected against Ziegler if someone at the IRS had realized he had actually filed for an Equivalent Hearing (EH), but I’ll get to that in a minute).

14 Months is not an exceptional amount of time to wait for IRS Appeals to issue a determination letter or notice of determination when a hearing is requested. Taxpayers should realize that while the delayed enforced collection is a good thing for their bank accounts and paychecks, interest and penalties will continue to accrue while the Appeal is pending.

The IRS Appeals decision made in the context of a CDP hearing is subject to review in Tax Court

Not only is a timely filed CDP hearing an effective way to shutdown the IRS Tax Machine, but the decision made by IRS Appeals is subject to review in Tax Court. This is important from two perspectives – some argue that Settlement Officers (IRS Appeals employees who hear CDP/EH cases) take CDP hearings more seriously than EH cases and are more careful to consider the arguments made by a taxpayer or her representative. This is especially a factor when the representative is a Lawyer or USTCP who can actually file the Tax Court petition when necessary. It is also important for the more obvious reason – it gives taxpayers a second shot at arguing their case in a forum that is even more removed from IRS Collections than IRS Appeals. But, something to keep in mind is that the standard of review in Tax Court for CDP cases is “abuse of discretion,” which is a very high hurdle. Taxpayers usually lose CDP cases in Tax Court.

Since a CDP hearing is subject to review in Tax Court, Collections is held at bay for an even longer period of time. In Ziegler, the Tax Court issued it’s decision on November 4, 2014. That means IRS Collections had to wait over three years to actually issue that levy it warned Ziegler about in the FNOITL. Again, in this case, if the IRS Appeals agent had realized sooner that s/he should have issued a “Decision Letter” instead of a “Notice of Determination” this delay in collection would not have taken place at all.

 

Downsides to timely filing a CDP Hearing

CDP hearings should never be submitted for the purpose of delay alone. This is for two reasons: the request is actually invalid if it is made solely for the purpose of delaying collection, and there is really no point in filing for a CDP hearing if you know you have no arguments to make. Why bother?

There are a few procedural downsides to timely requesting CDP Hearings:

The CSED (the time the IRS has to collect the tax from you) will increase

It is true that the IRS is prohibited from collecting taxes from a taxpayer when a CDP hearing is pending, but the flipside is that the in exchange for the delay of this collection, the IRS will have more time to collect. Generally, if you don’t take steps to stop the IRS collection clock, then the IRS only has 10 years from the date of assessment to collect a tax. (Certain other exceptions exist, but I won’t get into them here.) So, let’s just say that Ziegler hadn’t missed the filing deadline for the CDP hearing, and this case had proceeded to trial. The IRS would now have an additional 3+ years to collect his tax debts from him.

(Interest and penalties continues to accrue, so Ziegler’s tax debt is now much higher than it was in 2011 as well – something to consider.)

The time YOU have to wait to file for bankruptcy will increase

There are several rules to the dischargeability of tax debts in bankruptcy. I won’t get into them here. If you want to know more about them, contact me. Let’s just say that if you file for a CDP hearing, the time you have to wait to file for bankruptcy on the particular tax debt will increase as well.

 

There may be a better option

Equivalent Hearings are basically CDP hearings that are filed late. Filing for an EH has zero impact (it does not stop the clock) on the expiration (CSED) of your tax debts. Equivalent hearings, like CDP hearings, allow you to make your case for a Collection Alternative to someone who’s job it is to consider the merits of your arguments, and who isn’t also tasked with collecting taxes from you.

The IRS is not legally obligated to put off levy action when an Equivalent Hearing is filed, but it generally will. The biggest upsides to filing for a EH instead of a CDP is that the clock on the expiration of your tax debt continues to run, and you might  also be able to discharge those debts in bankruptcy sooner. The biggest downside is that there is no Tax Court review for EH hearings. This might encourage IRS Appeals to abuse its discretion, but it probably won’t.