Category Archives: Appeals

The Nuts and Bolts of IRS Appeals

There are two types of administrative appeals that can be filed within the IRS: the Collection Due Process Request (CDP) and the Collection Appeal Process Request (CAP).  Each is limited to specific issues that can be appealed, and each has its own scope of review.  A brief overview of each type of Appeal follows.

The Collection Due Process Request can be filed in one of two instances: when the IRS has issued a Notice of Filing of Federal Tax Lien or when it issues a Final Notice of Intent to Levy.

Generally speaking, the Notice of Filing of Federal Tax Lien does not warrant a Collection Due Process Request.  First, there must be a showing of extreme financial hardship due to the li
en filing.  While all lien filings can affect credit, loans or contracts, this is not sufficienStacked Paperst for success at Appeals.  Extraordinary and direct financial detriment must be shown.  Second, the right to appeal arises only after the lien is filed.  There are no pre-lien appeal rights.

A Collection Due Process Request based on a Final Notice of Intent to Levy, however, is used fairly frequently.  For one thing, if timely filed (within 30 days of the date of the Notice), it halts any and all IRS enforcement action for those periods listed in the Notice.  In fact, unless there are “pyramiding liabilities” for a business, it will halt enforcement action on all periods of liability, even those not included in the Notice.

For a taxpayer that needs time to gain compliance, the essential requirement for any resolution, a Collection Due Process or Equivalent Hearing Request can provide that time.  Most Collection Due Process or Equivalent Hearing Requests will take about six to eight months to be assigned and scheduled.  And at the Hearing, if the taxpayer has gained compliance, the case often can be resolved through an Installment Agreement.

A Collection Appeal Process Request can be filed when there is a levy or threat of levy (even verbal), when the IRS is seeking to default an Installment Agreement, or when the IRS rejects an Installment Agreement proposal that has been under review.  This Appeal also must be filed within 30 days of the IRS action at issue.  And, especially when a levy is at issue, Collection Appeal Process Request hearings tend to be held relatively quickly, sometimes within a few days of filing.

While a Collection Due Process Request can address substantive issues, such as whether an Installment Agreement is an appropriate alternative to levy, the scope of a Collection Appeal Process Request is limited to a review of whether the IRS followed procedure in taking the relevant action.  Nevertheless, if financial hardship can be demonstrated, it can be a very effective tool in preventing a threatened levy or releasing a levy already in place.

If you are looking for tax relief, learn more about the various ways in which we can help resolve your tax liability. 


Appeals on Penalty Abatement Requests

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If at first you don’t succeed… A taxpayer that is seeking an abatement on penalties will initially have to make the request through the Collections Division or other functions within the IRS.  When unsuccessful at this level, it would be wise to escalate the request to the IRS Appeals Division. Appeals is independent from the Collections Division and is tasked with resolving disputes on a fair and impartial basis without litigation.

The Treasury Inspector General for Tax Administration (TIGTA) recently conducted an audit to evaluate whether penalties assessed against taxpayers were fully or partially abated in accordance with Appeals criteria.  On July 30, 2015 TIGTA issued a statement on its findings, noting that Appeals has the authority to abate certain penalties when the abatement request has been denied by another function within the IRS.  Furthermore, the statement pointed out that in Fiscal Year 2013, Appeals abated approximately $127 million in penalties.

Generally, the audit found that in most cases, Appeals properly accepted cases in which the IRS operating division had previously denied the taxpayer’s request for abatement.  There were, however, a number of penalty appeals cases that were not abated in accordance with Appeals criteria.  TIGTA noted that in some cases, they could not determine the justification that Appeals personnel used in granting the penalty abatement. Additionally, the Treasury also determined that a small number of processing errors and control weaknesses might have affected the outcome of penalty abatement decisions at the Appeals level.

While the audit went on to conclude that additional training was necessary for Appeals Technical Employees on the requirements for justifying, documenting and granting abatement on penalties, it nonetheless illustrated the point that Appeals is an effective venue for a second chance at abatement of penalties.

We understand that appeals can play an important role in obtaining a desirable resolution. Click here to learn more about how we assist you with your unique situation.