Your Best Defense Against A Bank Levy
A Collection Due Process Hearing, also known as a CDP hearing, may be your last best chance to resolve a tax controversy and stop a bank levy with the IRS short of tax litigation.
The IRS does not allow taxpayers to request these hearings for “frivolous” reasons. That includes refusing to pay tax on religious or moral grounds.
What Are Some Legitimate Reasons to Request a CDP Hearing?
- You want to seek payment alternatives such as a payment plan or an offer in compromise. To get these plans accepted, you must file all delinquent returns.
- You have a terminal illness and overwhelming medical bills.
- You can’t pay because you’re living on Social Security or unemployment.
- You can’t afford to pay with your income—the IRS has strict guidelines on this type of hardship arrangement.
Complete Form 12153 Request for a Collection Due Process Hearing, and send it to the IRS at the address shown on the lien or levy notice within 30 days.
The taxpayer should check the IRS actions that he disagrees with and explain why he disagrees with such actions. If the taxpayer receives both a lien and a bank levy notice, the taxpayer may appeal both actions. The taxpayer must identify all reasons for disagreement, and may raise the following issues relating to the unpaid tax:
a. Appropriateness of collection actions;
c. Appropriate spousal defenses; and
d. The existence or amount of the tax, but only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability.
A taxpayer may not raise an issue that was raised and considered at a prior administrative or judicial hearing, if the taxpayer was involved meaningfully in the prior hearing or proceeding. To preserve the right to go to court, Form 12153 must be sent to the IRS within 30 days of receipt of the notice from the IRS.
Under CDP, a taxpayer is entitled to only one hearing relating to a lien notice and one hearing relating to a levy notice, for each taxable period. If a taxpayer receives a subsequent lien or levy notice after requesting a hearing on an earlier notice, Appeals can consider both matters at the same time.
Unless the IRS has reason to believe that collection of the tax is in jeopardy, the IRS will stop bank levy action during the 30 days after the bank levy notice and, if the appeal is timely, during the appeal process.
Form 12153 will also suspend the 10-year collection statute of limitations until the date the determination is final or the taxpayer withdraws, in writing, the request for a hearing. At the conclusion of the hearing,
Appeals will issue a written determination letter. If the taxpayer agrees with Appeals’ determination, both the taxpayer and the IRS are required to live up to the terms of the determination.
If the taxpayer does not agree with Appeals’ determination, the taxpayer may request judicial review of the determination by initiating a case in a court of proper jurisdiction (U.S. Tax Court or U.S. District Court, depending on the circumstances) on or before the 30th day after the date of Appeals’ determination.
Once the court rules, its decision will be binding on both the taxpayer and the IRS. The Office of Appeals will retain jurisdiction over its determinations and how they are carried out.
A taxpayer may also return to Appeals if his circumstances change and impact the original determination.
However, the taxpayer must first exhaust all administrative remedies.
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