Dealing with the IRS can be stressful, especially when facing liens or wage garnishments. But there’s a process that can help: the Collection Due Process (CDP) hearing. It’s a way to protect your rights and give you a fair chance to resolve your tax issues.
What is a CDP Hearing?
A CDP hearing allows you to challenge certain IRS collection actions, like a tax lien or a levy on your bank account. The IRS must send you a notice before taking these actions. Here are the main triggers that allow you to request a CDP hearing:
- Notice of Federal Tax Lien (NFTL): This notice tells you the IRS has filed a federal tax lien against your property.
- Notice of Intent to Levy: This Final Notice of Intent to Levy and Notice of Your Right to a Hearing alerts you that the IRS plans to seize your assets or wages.
- Notice of Levy on Your State Tax Refund: If the IRS plans to take your state tax refund to cover a federal tax debt, they will send this notice.
- Notice of Levy on a Federal Contractor Payment: If you’re a federal contractor and the IRS plans to levy payments owed to you, they will issue this notice.
When you receive one of these notices, you have 30 days to request a CDP hearing by filing Form 12153. During this period, the IRS must generally stop collection activities, giving you time to respond.
Why Should You Request a CDP Hearing?
- Temporary Relief from Collection: Requesting the hearing stops the IRS from taking immediate action against you, like levying your bank account or garnishing your wages. This pause provides you with some breathing room.
- A Fair Chance to Be Heard: The CDP hearing allows you to present your case to an independent IRS Office of Appeals officer. You can explain your situation, propose alternative payment options, or even challenge the tax amount if you haven’t done so before.
- Explore Negotiation Options: The hearing is your chance to negotiate. You might secure an installment agreement, request an Offer in Compromise, or ask the IRS to mark your account as Currently Not Collectible (CNC) if you face financial hardship.
- Prevent Further Penalties: Resolving your issues during the CDP hearing can help you avoid additional penalties and interest, which can add up quickly if the IRS continues collecting.
- Keep Your Right to Go to Court: If the CDP hearing doesn’t favor you, you can still take your case to the U.S. Tax Court. This means an impartial judge will review your case.
In short, a CDP hearing is a powerful tool. It gives you a fair shot to protect your assets and resolve your tax issues on better terms. If the IRS is coming after you with liens or levies, requesting a CDP hearing could be a smart move.
