If you’ve received a Final Notice of Intent to Levy or a Notice of Federal Tax Lien, you may have the right to request a Collection Due Process (CDP) hearing. This formal process allows you to challenge the IRS’s proposed collection actions and explore alternatives to resolve your tax debt. Here’s how a CDP works and how to use it to your advantage.
What is a CDP Hearing?
A CDP hearing allows you to dispute IRS collection actions like levies or liens. Filing for a hearing temporarily halts these actions while the IRS Office of Appeals reviews your case.
You must file your request within 30 days of the notice date using Form 12153. Missing this deadline limits your options, though you may still request an Equivalent Hearing, which provides less protection.
The CDP Process in a Nutshell
1. File Form 12153
Submit Form 12153 to the address on your notice. Indicate what you want to discuss, such as disputing the debt, requesting a payment plan, or arguing financial hardship. Be specific, as this will guide your hearing.
2. IRS Halts Collection Actions Temporarily
Once your request is received, the IRS pauses levies, garnishments, and liens. This gives you time to resolve the issue without immediate financial pressure. However, the downside is that the statute of limitations on collections (typically 10 years) is paused during the CDP process, giving the IRS more time to collect.
3. Work with the Office of Appeals
An impartial Settlement Officer will handle your case. The hearing can occur over the phone, virtually, or in person. During the hearing, you can:
- Propose a payment plan to pay over time.
- Request an Offer in Compromise (OIC) to settle for less than what is owed.
- If you face financial hardship, ask for Currently Not Collectible (CNC) status.
- Dispute the validity of the debt if it was miscalculated.
4. Settlement Officer Issues a Decision
After the hearing, the Settlement Officer issues a determination letter summarizing their decision. If you disagree, you have 30 days to petition the decision in Tax Court.
Why is a CDP Hearing Important?
A CDP hearing lets you avoid aggressive collection actions and negotiate a resolution. Even if you don’t dispute the debt, it’s a chance to explore manageable alternatives, such as installment agreements or CNC status.
Tips for a Successful CDP Hearing
- Act Fast: File Form 12153 within 30 days to maximize your rights.
- Be Prepared: Gather financial records or evidence to support your case.
- Negotiate: Be open to solutions that work for both you and the IRS.
A CDP hearing is your chance to hit the pause button on the IRS’s collection machine and take control of the situation. By knowing the rules and acting fast, you can turn a tax nightmare into an opportunity to negotiate on your terms—and maybe even sleep a little better at night.
