When a tax debtor fails to stay current with his or her tax obligations, the Internal Revenue Service (IRS) will eventually initiate collection proceedings in order to collect the outstanding tax liability from the tax debtor. Tax debtor should understand that just because the IRS is a federal agency, its actions are not always proper and legal, and given the particular circumstances of a tax debtor’s account, those actions may actually be improper and reversible under standard IRS procedures. In IRS terms, this means that tax debtor’s have what are called Collection Appeal Rights, i.e. rights to challenge the actions of the IRS and to potentially have the effects of those actions mitigated or reversed. Tax debtors in financially difficult situations should remain aware of their appeal options in the event that an IRS collection action causes extreme hardship.
Collection Appeal Rights can be broken down into two basic categories: Collection Due Process and the Collection Appeals Program. The IRS derives its authority to provide the tax debtor with Collection Due Process from IRC § 6320 which grants the tax debtor a right to appeal the filing of a Notice of Federal Tax Lien, and IRC § 6330, which grants the tax debtor a right to appeal either before or after a levy action depending upon the type of levy involved. Internal Revenue Service, Internal Revenue Manual 126.96.36.199 (02-23-2012) Overview of Collection Appeal Rights, available at https://www.irs.gov/irm/part5/irm_05-001-009.html. With respect to the Collection Appeals Program, IRC § 7122(e) grants the tax debtor a right to appeal the IRS’ rejection of installment agreement applications, as well as the right to appeal proposed and actual terminations of installment agreements. A tax debtor also has the right under the Collection Appeals Program to appeal proposed or actual lien, levy, or seizure actions. Finally, IRC § 7123 grants the taxpayer mediation and arbitration rights before Appeals, again provided by the IRS provides through the Collection Appeals Program. Other appeals rights relating to assessment of the trust fund recovery penalty, offers in compromise, abatement of penalty assessments due to reasonable cause, and jeopardy levies also exist for the benefit of tax debtors.
Tax debtors need to remain abreast of these appeals rights, and can do so by reviewing a number of IRS publications, including Publication 594, The IRS Collection Process, Publication 1660, Collection Appeal Rights, Form 9423, Collection Appeal Request, and Form 12153, Request for a Collection Due Process or Equivalent Hearing. That said, consulting with an experienced tax professional is ultimately the best mechanism for resolving issues relating to appeals.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.