PRACTICE CORNER FROM THE
Using a CDP (Collection Due Process) Hearing Request to STOP Enforced Collection
IRS PROBLEM Let’s say you’ve just been retained by a new tax resolution client, and they just received a Final Notice of Intent to Levy via an L1011 letter, 1058 notice, or CP 90. This notice comes by certified mail to your client. What do you do to prevent the IRS from garnishing their wages and/or levying their bank accounts? Let’s also say that the CSED (Collection Statute Expiration Date) is about to expire in 24 months. SOLUTION If the account is with ACS (Automated Collection System), wait until the 31st day from the date of the Final Notice and submit an Equivalent Hearing (EH) by checking that box on form 12153 (CDP). By submitting an EH CDP, ACS will transfer the entire account (not just the periods listed on the Final Notice) and send these to appeals. That means that ACS will more than likely halt collections (although it’s not mandated), and it doesn’t stop the CSED from running. This gives you plenty of time to come up with your permanent resolution strategy, which may include a partial pay installment agreement (PPIA), currently not collectible status (CNC), or an offer in compromise (OIC), all while the CSED clock is ticking down! If the CSED(s) don’t expire for three or more years, timely file the CDP (within 30 days of the final notice date) with ACS. Collection will be halted by law, but CSED clock will stop, which is irrelevant when there is still a lot of time remaining before expiration and you get to preserve your client’s tax
court rights if you get an unfavorable determination in appeals. In both instances, you’ll have 4–6 months before the CDP hearing date. That doesn’t mean you must wait 4–6 months to resolve the case. If you’re doing an OIC, for example, and you’re ready to submit your 433A and 656 package, merely withdraw the CDP via form 12156 and submit an OIC to the centralized offer unit. If the case is with an RO (revenue officer), you’re a bit more limited to what you can do, especially if you’re beyond the 30 days from the Final Notice date. However, if you have a good working relationship with the RO, you and he/she may be able to come to a resolution without having to file a CDP. However, if you have an unreasonable RO, file a timely CDP. This will get the case out of his/her inventory and sent to appeals, thereby halting ALL enforced collection and deal with the case at the CDP hearing.
Here’s the bottom line: Don’t automatically file a CDP or an EH just because you’ve received an L1011 or 1058 or CP90. CSEDs rule! Based on the expiration of the CSED and where the case is (ACS vs. RO) will determine your strategy. Remember, we play chess while the IRS plays checkers! Another option is to file a CAP (Collection Appeal Protest) via form 9423 if a levy or lien is imminent or already has been filed. This also gets the case out of collections, albeit for a much shorter time, and sent to appeals for a determination. Generally, you file a CAP when there’s a rejection of an installment agreement, termination of a “pending” status of an installment agreement, federal tax lien filed (in cases where taxpayer has securities license or security clearance), or a levy filed.
–Michael Rozbruch
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