Collection Due Process Hearings: How They Can Help Taxpayers Challenge an IRS Collection Action
The tax attorneys at Nardone Law Group in Columbus, Ohio routinely help individuals and businesses utilize the Internal Revenue Service’s (“IRS”) collection alternatives to manage their federal tax liabilities. The IRS has significant power to collect delinquent tax debts from taxpayers, including the ability to file a Notice of Federal Tax Lien or to obtain Notice of Intent to Levy against a taxpayer’s assets. Utilizing a collection alternative may help prevent, or significantly reduce the effect of, an IRS collection action. Therefore, it is important for taxpayers to understand the various collection alternatives available to resolve federal tax liabilities when contacted by an IRS revenue officer. Some collection alternatives include: installment agreements, offers-in-compromise, discharging taxes in bankruptcy, currently not collectible status, and challenging the underlying tax liabilities. One way to present collection alternatives and dispute the IRS' collection actions is through a Collection Due Process hearing.
General Summary of Collection Due Process Hearings
When a taxpayer is contacted by an IRS revenue officer, whose intent is to collect delinquent tax liabilities from that taxpayer, taxpayer's options are limited. Further, the IRS revenue officer really does not care why the taxpayer has not paid or cannot pay. Rather, the revenue officer only cares about finding out how the IRS can get paid. Or said another way:
"Show me the Money!"
Thus, one option that maybe available to taxpayers is to avail themselves of the IRS' Collection Due Process hearing procedure. Through the Collection Due Process procedure, an impartial IRS employee from the IRS Office of Appeals conducts the necessary hearing. The Collection Due Process hearing procedure was created to give taxpayers rights to appeal lien and levy actions brought against them. At a Collection Due Process hearing, the taxpayer has the opportunity to propose collection alternatives, such as those listed above, or, under limited circumstances, challenge the underlying tax liability. Collection Due Process hearings are an excellent opportunity for taxpayers to present their case, explain their situation, and ultimately, find the best solution possible for them.
Forfeiture of Ability to Challenge the Liability at Collection Due Process Hearing
A recent decision by the Ninth Circuit, U.S. Court of Appeals, affirming a decision by the U.S. Tax Court, however, highlighted one important procedural error that taxpayers must be wary of. In Buckardt v. Commissioner, the court addressed whether a taxpayer could dispute pending tax liabilities at a Collection Due Process hearing. In Buckardt, the IRS was attempting to collect unpaid federal income taxes from an individual taxpayer by way of Notice of Intent to Levy. The question was whether the taxpayer could challenge the underlying liability in the proceeding, when he had failed to do so prior to the Collection Due Process hearing. The court cited to 26 U.S.C. §6330(c)(2)(B), which states that a person may raise challenges to underlying tax liability in the hearing regarding a proposed levy if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such liability.
Ultimately, the court upheld the IRS’s collection action because the court found that the taxpayer received Notices of Deficiency for the tax years at issue. But, the taxpayer failed to challenge, or appeal, the Notices of Deficiency, even though he had prior opportunity to do so.
NLG Comment: From our perspective, the lesson to take from this case is to ensure you timely respond to any IRS notice, whereby the taxpayer disagrees with the IRS action. If we fail to respond, we may lose the right to dispute the underlying liability in a later proceeding, as heighted in Buckardt above.
Contact Nardone Law Group
Nardone Law Group regularly helps taxpayers present IRS collection alternatives, through Collection Due Process hearings. If you or your business have been contacted by an IRS revenue officer, or are struggling with tax liabilities, you should contact an experienced tax attorney today. Nardone Law Group’s tax lawyers and professionals have vast experience representing clients before the IRS. We will thoroughly review your case to determine what options and alternatives are available, including Collection Due Process hearings.