Most persons subject to an IRS levy are entitled to a pre-levy administrative hearing, also called a collection due process (CDP) hearing. At least 30 days before the first levy is issued, the IRS generally must provide the person with written notice of the right to a hearing. When making a jeopardy levy, a levy against state tax refunds, or, for levies issued after September 22, 2007, a disqualified employment tax levy, the IRS can provide notice of the right to a CDP hearing after the levy is issued. The notice must explain levy procedures and appeal rights, and provide ways for the person to contact the IRS. An offset of an overpayment against back taxes is not a levy and does not give the taxpayer a right to a CDP hearing.
A request for a CDP hearing must be made within 30 days after the date of the CDP notice. A timely written request is a jurisdictional prerequisite to judicial review of CDP hearings, and also begins the suspension of the statutes of limitations for collections, lawsuits, and criminal prosecutions. The taxpayer may also engage in oral discussions with the IRS, but the 30-day time limit is not affected.
CDP hearings are held by the IRS Appeals Division. The hearing must be conducted by an impartial IRS agent with no prior involvement in the case. The taxpayer may raise spousal defenses, challenge the appropriateness of the IRS collection actions, and offer collection alternatives, including Offer In Compromise. A CDP hearing can also resolve issues related to the CDP hearing notice and request. However, a CDP hearing cannot address the assessment underlying the deficiency unless the taxpayer did not receive a notice of deficiency or have any other opportunity to challenge the deficiency.
After the hearing, Appeals mails the taxpayer a dated notice of determination setting forth its conclusions. The taxpayer has 90 days to file a court petition challenging a determination relating to innocent spouse relief, and 30 days to challenge any other determination. If a court determines that the taxpayer’s petition was filed in a court that lacked jurisdiction, the taxpayer has an additional 30 days to refile the petition in the correct court. If the amount of the taxpayer’s tax liability was considered at the CDP hearing, the court can review the liability; otherwise, the court reviews the CDP determination for abuse of discretion. The periods of limitation for collection after assessment, criminal tax prosecutions and civil suits are suspended from the date the IRS receives the taxpayer’s written request for a hearing until the date the IRS receives the taxpayer’s written withdrawal of the request for a hearing or the determination resulting from the hearing becomes final because the time for seeking review or reconsideration has expired.
A taxpayer who fails to timely request a CDP hearing may ask for a similar administrative hearing called an equivalent hearing. Equivalent hearings do not entitle the taxpayer to seek judicial review of the IRS’s determination.
The statutes and regulations for pre-levy notice and hearings apply to collection actions that are initiated after January 18, 1999. A taxpayer’s right to a CDP hearing based on a levy notice issued after January 18, 1999, was not affected by a lien notice issued before that date because the lien and the corresponding levy did not constitute a single collection action for purposes of CDP hearings. CDP proceedings are not available for collection actions initiated and completed before January 18, 1999. The Tax Court did not have jurisdiction to review a continuous wage levy when the collection action was initiated before January 19, 1999.