Is the Internal Revenue Service (IRS) always correct when assessing taxpayers’ tax returns? Of course not. Since IRS agents are human, they can make incorrect decisions or mathematical mistakes. How do you reverse their mistakes? A Collection Appeal allows taxpayers to challenge IRS’s actions regarding the collection of past taxes which may include the placement of liens and/or levies against taxpayer’ properties for the purpose of collecting said taxes. This challenge will stop or reverse any collection process and relieves the taxpayer of any collection actions in many cases.
Once you fall behind on your tax obligations, the IRS will begin the collection process on any outstanding balances. The IRS is permitted to place liens and levies on properties and assets to ensure the collection of taxes owed. The collection process begins with collection notices from the IRS outlining their intent to collect. Like any other entity, the IRS can be wrong in assessing taxes, penalties, interest or even that you owe money in the first place. Luckily, any wrongful actions can be reversed.
The IRS recognizes two types of collection appeals: Collection Due Process (CDP) and the Collection Appeal Program (CAP). Both options apply to specific circumstances. Sometimes these circumstances may overlap so consulting a tax professional is very important when choosing an option.
The Collection Due Process allows the taxpayer to appeal a Notice of Federal Tax Lien, before and after a levy has been placed on a property, depending upon the type of levy. A CDP may stop or reverse the collection process. According to the IRS, you would use the Collection Due Process to appeal when you have received one of the following notices or are in one of the following situations:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320
- Notice of Jeopardy Levy and Right of Appeal
- Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
- The collection is found to be a mistake
- Any collection that may cause financial hardship
You must file an appeal of the IRS’ ruling and/or actions within 30 days of the receipt of the first notice of a right to a hearing to be eligible for Collection Due Process. All collections actions by the IRS are stopped until a final decision is made. Filing a CDP after the 30-day window is permissible but it does not stop the IRS from taking collection actions against you.
The second option, the Collection Appeal Program, is used in the following circumstances:
- Before or after the IRS has placed a lien, levy, or any other seizure action on your property for the collection of past taxes
- The rejection or termination of an Installment Agreement
But not in the following situations:
- Trust Fund Recovery Penalty
- Jeopardy levies
- Issues not within the scope of the IRS
- Offer in Compromise
- Actions taken by a Court
- Collection decisions that do not allow for the release of a lien
Being more lenient, CAP allows you to file an appeal before or after an action is taken by the IRS, although it is best to take immediate action. Filing for CAP before the IRS starts any collection action usually protects you from any collection action unless the IRS feels that the collection of the tax debt is at risk.
It is best to consult a tax professional if you believe that the IRS may place a collection action against your properties. A knowledgeable tax professional can explore all your options and determine what course of action will produce the best outcome for you. As always, we at Bullseye Tax Relief are here for you to help with any tax resolution issues. Call us today!