If you have unpaid taxes, the IRS may have already taken or may soon take collection action against you, such as filing a lien, issuing a levy, or rejecting an installment agreement. Fortunately, you may be able to challenge these actions through the IRS Collection Appeal Program (CAP).
We’ll examine the Collection Appeals Program, show you when it can be used, describe how to submit a request, and explain what happens during the appeal process.
If you need immediate assistance with an appeals matter, contact East Coast Tax Consulting Group today.
Key Takeaways
- The Collection Appeals Program offers a quick and informal way to challenge IRS collection actions, including liens, levies, property seizures, and installment agreements.
- You must speak with a manager before submitting a CAP appeal, except in cases involving certain installment agreement disputes. After that, file IRS Form 9423 within the required time limits.
- The IRS will cease collection activity during the appeal process.
- A Settlement Officer from the IRS Office of Appeals usually holds hearings within 5 to 15 business days, often by phone.
- You need to explain why you believe the IRS’s collection actions are incorrect and suggest a solution.
- You cannot contest the CAP decision.
Understanding the IRS Collection Appeals Program
The IRS designed the Collection Appeal Program to provide taxpayers with a fast and informal way to resolve disputes regarding certain collection actions. You can use it both before and after the IRS has taken action, and it is often quicker than other appeal routes.
The appeal is conducted by the Independent Office of Appeals, which operates separately from the IRS to ensure its impartiality. CAP differs from a Collection Due Process (CDP) hearing, which is also conducted by the Office of Appeals. A CDP hearing offers broader legal protections but has stricter qualifications and longer timelines. When both CAP and CDP rights are available to you at the same time, you must determine which offers the best chance for a successful resolution. Often, requesting a CDP hearing is the best course of action.
The outcome of a CAP hearing is final. It cannot be appealed further within the IRS or taken to the U.S. Tax Court. However, in limited situations, you may be entitled to seek a judicial review of the determination. For example, a third party may have the right to challenge a wrongful levy in court.
When You Can Use CAP
The Collection Appeal Program is available in specific situations. Collection actions that you may appeal under CAP include the following.
Notice of Federal Tax Lien. You may appeal the proposed filing of a Notice of Federal Tax Lien (NFTL) or the actual filing of an NFTL. You can also appeal denied requests to withdraw an NFTL, along with denied discharges, subordinations, and non-attachments of a lien.
Third parties may appeal the filing of a notice of lien against alter ego or nominee property.
Notice of Levy. You can file an appeal before or after the IRS imposes a levy on your wages, bank account, or other assets. Additionally, if the IRS has already received the proceeds from the levy, you may appeal their decision to deny your request for the return of the levied property.
Seizure of Property. You can appeal either before or after the IRS seizes your property, but you must do so before the property is sold.
Rejection, Termination, or Modification of an Installment Agreement. You can appeal if the IRS denies your request for an installment agreement. Additionally, you can appeal if the IRS proposes to terminate your installment agreement, actually terminates it, or proposes modifications or modifies your installment agreement.
Denial of Administrative Claim for Return of Levied or Seized Property. If you’re a taxpayer whose property has been levied or seized, and you made an administrative claim for its return that was denied, you can request a CAP appeal.
If you’re a third party not liable for the tax and the IRS has levied or seized your property or property in which you hold a superior interest over the IRS, you can appeal the IRS’s denial of your request (wrongful levy claim) to release the levy or seizure, or to return either the property or its value.
Step-by-Step: How to File a CAP Appeal
To initiate a CAP appeal, first speak with a collections manager if the original employee cannot resolve your issue.. If that doesn’t lead to a resolution, you can then proceed with a formal CAP request. Although recommended, it is not a requirement to speak with a manager before submitting a CAP request for an installment agreement issue.
If the manager cannot resolve your issue, notify the collection office within two business days after your call or meeting that you intend to appeal. Then, postmark Form 9423 Collection Appeal Request within three business days following your discussion with the manager.
If you request a conference with a manager and do not receive a response within two days, you can proceed and file Form 9423. In this situation, use box 15 on the form to indicate that you requested a managerial conference and did not receive a response. If the manager makes a reasonable effort to reach you but you ignore their calls, you could lose your opportunity for a CAP hearing.
Prepare Form 9423
The next step is to complete IRS Form 9423, titled “Collection Appeal Request.” This short form includes essential details such as:
- Your name, address, SSN/EIN, and contact information
- Type of tax, the tax period involved, and the amount of tax due
- The type of action being appealed (e.g., levy, lien, installment agreement)
- A clear explanation of why you disagree with the IRS decision
- What you propose as a resolution
Be concise but thorough, and attach any supporting documentation you have. The Appeals Office will rely heavily on the information you provide to evaluate your case.
Although this form appears short and straightforward, you might consider hiring a tax professional to assist you in completing it. Your appeal is more likely to succeed if you work with someone who possesses a strong understanding of tax law.
Once completed, Form 9423 should be submitted to the IRS office that initiated the collection action. Do not send the form to the appeals section, as it may result in delays.
Does Timeliness Matter?
Aside from seizure-related appeals, which must be submitted within 10 business days of the notice being provided to the taxpayer or left at their home or business, and installment agreement appeals, which need to be filed within 30 days of the relevant decision, there is no deadline for requesting a CAP appeal.
However, be aware that waiting too long may result in the IRS proceeding with the collection action, which can be difficult or impossible to reverse later.
What Happens After You Submit?
If your request is submitted in a timely manner, the IRS will not take any collection action against you unless it believes the collection of the tax is in jeopardy.
The goal of the CAP program is to reach a decision as quickly as possible, with hearings usually taking place within 5 to 15 business days.
CAP hearings are conducted informally and may occur in person, via video conference, through the mail, or most commonly, by telephone. This is your opportunity to present your case, so be prepared.
The matter will be heard by a Settlement Officer, who will review the appropriateness of the action proposed or taken based on law, regulations, policy, and procedures, after considering all relevant facts and circumstances.
Remember, except in very rare situations, once a decision is made, it’s final.
Should You Get Professional Help?
While taxpayers can file a CAP appeal on their own, it may be wise to consult a tax professional, especially if the situation is complex or involves significant amounts of money. Tax attorneys, enrolled agents, and CPAs experienced in collection issues can help you craft a strong explanation, present financial documentation, and deal with IRS personnel.
Errors in your Form 9423 could result in undesirable outcomes, so having another set of eyes on your submission can be a big help.
Closing Thoughts about the IRS Collections Appeals Program
The IRS Collection Appeal Program is one of the most accessible tools available to taxpayers dealing with aggressive IRS collection actions. Although it lacks judicial review, decisions are typically made promptly, and the process remains relatively straightforward.
If you receive notice of a lien, levy, or installment agreement denial, don’t wait. Time is of the essence. Take the opportunity to be heard through CAP before the IRS takes action that could seriously impact your finances.
If you require professional IRS Collection Appeals representation, call the tax professionals at East Coast Tax Consulting Group today.