Collections

If you decide you want to present your dispute to Appeals, you will need to prepare a request for Appeals and mail it to the office that sent you the decision letter. Make sure you discuss this appeal process with a tax professional.

Types of Collections

Collection Appeals Program (CAP)
Collection Appeals Program (CAP) is generally quick and available for a broad range of collection actions. However, you can’t go to court if you disagree with the Appeals decision.

Collection Due Process (CDP)
Collection Due Process (CDP) is available if you receive one of the following notices: Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (Lien Notice), a Final Notice – Notice of Intent to Levy and Notice of Your Right to A Hearing, a Notice of Jeopardy Levy and Right of Appeal, a Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing (Levy Notices), and a Notice of Levy and Notice of Your Right to a Hearing. If you disagree with the Appeals decision, you may be able to take your case to court.

Offer in Compromise (OIC)
An Offer in Compromise (OIC) is an agreement between the taxpayer and the government that settles a tax liability for payment of less than the full amount owed.

Trust Fund Recovery Penalty (TFRP)
If you are a person responsible for withholding, accounting for, or depositing or paying specified taxes including non-resident alien (NRA) withholding and employment taxes, and willfully fail to do so, you can be held personally liable for a penalty equal to the full amount of the unpaid trust fund tax, plus interest. A responsible person for this purpose can be an owner or officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. A trustee or agent with authority over the funds of the business can also be held responsible for the penalty.

Trust Fund Recovery Penalty (TFRP)

Preparing a request for Appeals.

Small Case Request

If the total amount of the proposed assessment for each tax period is $25,000 or less, you may file a small case request.  If more than one tax period is involved and any tax period exceeds the $25,000 threshold, a formal written protest for all periods must be filed.

Send a letter stating that you want to Appeal the proposed assessment(s) to the attention of the IRS officer whose name and address are listed on the letter (Letter 1153) that you received.

• Enclose a copy of the Letter 1153 and include your name, address, social security number, and daytime telephone number.
• Explain why you don’t believe you are responsible for the unpaid taxes and/or the reason you disagree with the amount of the proposed assessment(s).
• Include a clear explanation of your duties and responsibilities during the tax period(s) listed in the letter.

Formal Written Protest

If the total amount of the proposed assessment for any one tax period is greater than $25,000, you must file a formal written protest for all periods.

• Send your formal written protest to the attention of the IRS officer whose name and address are listed on the letter (Letter 1153) that you received.
• Include a statement that you want to appeal the proposed assessment(s).
• Include your name, address, social security number, and daytime telephone number.
• Enclose a copy of the Letter 1153.
• List the tax periods involved.
• Explain why you don’t believe you are responsible for the unpaid taxes or the reason you disagree with the amount of the proposed assessment(s).
• Include a clear explanation of your duties and responsibilities.
• Cite the law or authority, if any, on which you are relying.
• Sign the written protest under the penalties of perjury, by making the following statement: “Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct, and complete.”

If your representative prepares and signs the protest for you, he or she must substitute a declaration stating:

• He or she submitted the protest and accompanying documents.
• He or she knows personally that the facts stated in the protest and accompanying documents are true and correct.

Offer in Compromise (OIC)

If you received a letter notifying you that your offer was rejected you have 30 days to request an appeal of the decision. You can request an Appeals conference by preparing either a Form 13711, Request for Appeal of Offer in Compromise, or a separate letter with the following information included:

• Name, address, SSN, and daytime telephone number
• A statement that you want to appeal the IRS findings to the Appeals office
• A copy of your rejected offer letter
• Tax period or years involved
• A list of the specific items you don’t agree with and a statement of why you don’t agree with each item
• Any additional information you want Appeals to consider
• The facts supporting your position on any issue that you do not agree with
• The law or authority, if any, on which you are relying
• Sign the written protest, stating this it is true under the penalties of perjury

For more information please refer to Form 656, Offer in Compromise, and the Appeals Online Offer in Compromise (OIC) Self-Help Tool.

Offer in Compromise (OIC) Disagreed Items

In preparing a request for an appeal, compile a list of specific items you do not agree with and a statement explaining why you disagree with each item. You may find a review of the following beneficial:

• The Asset/Equity (AET) and Income/Expense (EIT) Tables that accompianed the OIC denial letter;
• Your Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals;
• the supporting documentation submitted with the Form 433-A; and
• Publication 1854: How to Prepare a Collection Information Statement.

Check your figures and calculations again and verify the documents you submitted to Collection. If you do not have your completed Form 433-A available, refer to a blank Form 433-A.

• The Monthly Income/Expense Statement (see Section 4, Page 4) requires you to provide the following:
  • Proof (i.e. pay stubs and earnings statements) of gross earnings and deductions for the past three months from each of your employers;
  • Proof of pension, social security and/or other income for the past three months;
  • A current statement from the lender on your automobile with the monthly payment and balance due;
  • A current statement from the lien holder on your residence with the monthly payment and balance due;
  • A copy of your last Form 1040 with all schedules, and
  • Proof of current expenses paid for the past three months including utilities, rent, insurance, property tax, non-business transportation expense (i.e. car payments, lease payments, fiel, oil, insurance, registration, parking), healthcare (including insurance premiums co-payments, other out-of-pocket expenses) and court-ordered payments.

Note: The amounts used on the “Monthly Income/Expense Statement” of Form 433-A could be different than the amounts used on the IET worksheet for food, clothing, miscellaneous, transportation, housing and utilities, out-of-pocket healthcare and other expenses. Collection Financial Standards are used to help determine a taxpayer’s ability to pay a tax debt. All standards, except miscellaneous, are derived from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CES). These financial standards are explained below:

• National standard expense allowed for food, clothing and miscellaneous monthly expense. The standard amount is computed based upon your income and family size instead of actual expenses.
• National standard expense allowed for out-of-pocket healthcare expenses including medical services, prescription drugs, medical supplies (i.e. eyeglasses, contact lenses, etc.). This amount is based on Medical Expense Expenditure Panel Survey data and is in addition to the amount paid for health insurance.
• Housing and utilities expense allowed for housing and utilities monthly expense. The standard amount is computed based upon the state and county where you reside and your family size.
• Transportation expense allowed for monthly transportation expenses. The standard amount is computed by combining the standard for ownership cost and operating cost. This is based on the number of vehicles you own and the region you live.

• Did you compute the amounts in accordance with instructions?

Review the instructions in the following sections on Form 433-A:

• Section 4, Items 11-13: Cash on Hand, Personal Bank Accounts and Investments
• Section 4, Items 14-15: Available Credit and Life Insurance
• Section 4, Items 17-19: Personal Asset and Liability
• Section 5: Self-Employed

Note: Certain assets such as vehicles, and real estate should be valued at the quick sale value. This is the amount you can sell the asset today. You may compute the value of a vehicle by consulting a trade association guide for the fair market value (FMV) and discounting the value by 20%. You may compute the value of real estate by an appraisal, the replacement cost value on your residence and possibly the taxable value of your home.

• Did you provide the required attachments?

See the bottom of page 4 of Form 433-A for “Attachments Required for Wage Earners and Serf-Employed Individuals.”

Collection Due Process (CDP)

CDP procedures are available to you if you’ve received any one of the following notices:

• Notice of Federal Tax Lien
• Notice of Intent to Levy

CDP Procedure

• You have 30 days to request a hearing to preserve your right to go to Court.
• Complete Form 12153, Request for a Collection Due Process or Equivalent Hearing
  • It is important you identify all your reasons for your disagreements.
• The completed Form 12153 should be sent to the same address that is shown on your Lien or Levy Notice.
• If your request is not received within 30 days, you are still entitled to an Appeals hearing. However, if you still disagree with the Appeals determination you cannot go to Court.

For more information please refer to:

• Publication 1660, Collection Appeals Rights
• CDP Frequently Asked Questions

Collection Appeals Program (CAP)

If you choose to go through this CAP process then you cannot go to Court on the Appeals’ decision.

CAP procedures are available to you if you’ve received any one of the following notices:

• Notice of Federal Tax Lien
• Notice of Levy
• Notice of Seizure
• Denial or Termination of Installment Agreement

CAP Procedures

If your only collection contact has been a notice or telephone call:

• Call the IRS telephone number shown on your notice
• Explain why you disagree and that you want to appeal the decision
• Be prepared to offer a solution
• Before you can come to Appeals you will need to first discuss your case with a Collections manager.

If you have been contacted by a Revenue Officer:

• Call the Revenue Office you’ve been dealing with
• Explain why you disagree and that you want to appeal the decision
• Be prepared to offer a solution
• Before you can come to Appeals you will need to discuss your case with a Collections manager.
• Complete Form 9423, Collection Appeals Request
• You have 2 days from your conference with the Collections manager to submit Form 9423 to the Revenue Officer.

For more information please refer to:

• Form 9423, Collection Appeals Request
• CAP Frequently Asked Questions