sales tax audits

There are many potential reasons as to why you might dislike the IRS. One reason could be the sheer complexity of the U.S. Tax Code and how it’s difficult to understand how and why the IRS does what it does. Another reason might be the prospect of dealing with a tax audit. But one of the biggest fears you probably have of the IRS relates to how relentless and effective the IRS is in collecting unpaid taxes.

In addition to forcing you to pay large amounts of money unexpectedly, the collection process is also confusing and intimidating. There are several letters and notices you might receive, as well as deadlines for taking action that you don’t fully understand. Luckily, there is often an appeals process that you can use if you disagree with the IRS’s actions or decisions.

The goal of this article is to provide some clarity as to what your options are if you disagree with the IRS when it tries to collect a tax debt from you. Specifically, we’ll focus on the Collection Appeals Program. 

What Is the Collection Appeals Program? 

A Collection Appeals Program (CAP) refers to a series of procedures that allows you, the taxpayer, to challenge an IRS decision during the collection process. You can usually utilize the CAP:

  • Before or after the IRS files a Notice of Federal Tax Lien
  • Before or after the IRS serves you a Notice of Intent to Levy.
  • Before or after the IRS seizes (levies) your property.
  • When the IRS terminates (or proposes to terminate) an installment agreement.
  • When the IRS rejects an installment agreement application (or rejects your request for a modification of the installment agreement).
  • When the IRS modifies (or proposes to modify) an installment agreement.

The CAP is also available in less common cases, such as:

  • The IRS denies your request to be discharged from a lien
  • The IRS denies your request to subordinate a lien
  • The IRS denies your request to withdraw a Notice of Federal Tax Lien
  • The IRS denies your request for the issuance of a certificate of non-attachment
  • The IRS disallows your request (or a third party’s request) for the return of levied property under Internal Revenue Code Sections 6443(d) or 6443(b).
  • Third-party claims to property (includes alter ego and nominee liens).

How the IRS CAP Process Works 

The exact process depends on what steps the IRS has already taken to collect a tax debt from you and exactly what you want to appeal. Generally speaking, the CAP process starts with you asking to talk to an IRS supervisor or manager. If this discussion can’t resolve your disagreement, then you can use IRS Form 9423, Collection Appeal Request to ask for an appeal to the IRS Independent Office of Appeals (Office of Appeals).

Once the Office of Appeals makes its decision, it is binding on you and the IRS; there is no further appeals review available, even involving a court. One caveat to this is that in limited cases, even though the CAP decision can’t be reviewed, certain issues raised during the CAP might be reviewable through an alternative judicial or administrative process. 

How to Request a CAP Appeal 

The first step in requesting a CAP appeal depends on your interactions with the IRS up to that point and what you’re appealing. If your only contact with the IRS concerning tax collection has been by mail or telephone and you’re appealing a lien or levy action, here’s what you do:

  1. Call the IRS using the telephone number provided on your notice or letter.
  2. Tell the IRS employee why you disagree and that you want to appeal its decision. Before calling, make sure you have any information or documents available to reference. It also helps to have an idea of what you want the IRS to do in response to your disagreement.
  3. If these discussions don’t resolve your issue, then you can ask to speak with a Collection manager (this step isn’t required if your appeal involves the IRS rejecting, modifying, or terminating an installment agreement).
  4. The IRS employee will refer you to the Collections manager, who will either immediately discuss your case with you or call you back within 24 hours.

If things aren’t resolved with the Collection manager, then you can ask for the Office of Appeals to review your case. You don’t need to file a special form or submit a special request. All you have to do is tell the Collection manager that you disagree with their decision and that you want the Office of Appeals to handle your appeal.

If your contact with the IRS during its attempts to collect a tax debt from you involves a revenue officer and you want to appeal a lien, levy, or seizure action, then you’ll use the following process:

  1. Call the IRS revenue officer and explain why you disagree with them and that you want to appeal the decision.
  2. Before calling, make sure you have any information or documents available to reference and at least one proposed solution that you’d like the IRS to implement to resolve your tax dispute.
  3. If these discussions don’t resolve your issue, then you can ask to speak with a Collection manager (this step isn’t required if your appeal involves the IRS rejecting, modifying, or terminating an installment agreement).
  4. The revenue officer will refer you to the Collections manager, who will either immediately discuss your case with you or contact you within two business days.
  5. If the Collection manager can’t resolve your disagreement, then you may submit a written request for the Office of Appeals to review your case. You can do with by completing IRS Form 9423 and submitting it to the IRS collection office handling your case.
  6. If you plan on submitting Form 9423, you must let your revenue officer or the Collection manager know within two business days of your conference with the Collection manager.
  7. Form 9423 must be postmarked within three business days of the conference with the Collection manager.
  8. If you don’t do steps six and seven, the IRS may resume its collection action against you.

If you want to appeal a decision concerning an installment agreement that’s been rejected, modified, or terminated (or there’s been a proposal for modification or termination), you can start the CAP process by calling the IRS using the number on the letter or notice you received regarding the installment agreement. During this call, you can explain you want to appeal the IRS’ decision. This will start the CAP process, except in cases where your installment agreement letter came from a revenue officer.

In this situation, you’ll have to request the appeal in writing, preferably by completing Form 9423 and sending it to the revenue officer or office handling your installment agreement. You must make this request within 30 days of the IRS’ decision concerning your installment agreement. Note that this CAP process doesn’t require you to talk to the Collection manager, although this is strongly recommended. 

Completing IRS Form 9423 

This is a short form, consisting of just one page. On it you’ll identify what you’re appealing, the reason you’re appealing, and how you suggest your disagreement with the IRS get resolved. Even though this is a short form, what you file with the IRS could include additional pages because you may need to attach documents to support your arguments for the appeal.

If you have any questions, the instructions that come with the form can help. If you’re still confused or aren’t sure how to explain why the IRS should side with you on your appeal, you can always consult with a tax professional, such as one from Seattle Legal Services, PLLC.

When to File a CAP Appeal 

When it comes to how much time you have to request an appeal, the deadline is usually dictated by the lien, seizure, or levy process timeline. Yet once you make the telephone call to the IRS to start the appeal process, things can go quickly. Any deadlines will usually only apply once you start the CAP process, such as having two or three days to notify the IRS of your filing of Form 9423 to stop the IRS from resuming its collection action. The only real deadline comes in when appealing the IRS’ decision concerning an installment agreement, where you have 30 days. 

What Happens After You File Form 9423? 

After you file your appeal using Form 9423, the IRS will temporarily stop its collection actions until your appeal gets resolved. Keep in mind that you may have just two or three business days to notify the revenue officer or Collection manager that you filed Form 9423. If you don’t do this, the IRS might resume its collection actions because it’s not aware that you’re continuing your appeal with the Office of Appeals.

One exception to this pause is if the IRS believes you are taking steps to hide or move assets to prevent the IRS from collecting your tax debt. In this case, the IRS may choose to continue its collection action (such as proceeding with a bank levy) during your appeal.

After receiving Form 9423, the Office of Appeals may ask the Collection Function of the IRS to review and assess any new information you provide. After examining the information you’ve provided, the Office of Appeals will schedule an appeals conference with you and/or your representative. These conferences are informal and can occur by mail, telephone, video conference, or in person.

Recall from earlier that once the Office of Appeals makes its decision, it’s final and binding on both you and the IRS. Only in limited situations are further appeals possible. While this should go without saying, if the IRS learns that you provided false information or engaged in fraud during the appeal, the decision from the Office of Appeals will be void. 

Other Options Other Than CAP 

The Collection Appeals Program applies to a wide range of collection activities, but it’s not always an option. Or, it’s just one of several options to appeal or otherwise contest the IRS’ decision. For example, another common path to appealing an IRS decision is to ask for a Collection Due Process (CDP) hearing.

A CDP hearing allows you to appeal an IRS collection action with the Office of Appeals. It’s only available if the IRS sends you a notice specifically stating you can appeal by requesting a CDP hearing. IRS notices that typically provide this right are:

  • Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing
  • Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
  • Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
  • Post Levy Collection Due Process (CDP) Notice
  • Notice of Jeopardy Levy and Right of Appeal

If you’d like to appeal the IRS’ decision to reject an Offer in Compromise, you’ll use a different process that begins with completing IRS Form 13711, Request for Appeal of Offer in Compromise.

In certain collection cases involving Trust Fund Recovery Penalties or Offers in Compromise, the Fast Track Mediation – Collection (FTMC) program may be available. This is an expedited dispute resolution process where an Office of Appeals employee serves as a neutral third party to help you and the IRS negotiate an agreement. To be considered for the FTMC program, you and the IRS employee handling your case must sign IRS Form 13369, Agreement to Mediate. 

CDP Hearing Vs. a CAP Appeal: What’s the Difference? 

The CAP is usually faster than a CDP hearing, as it’s usually immediately available once the IRS makes a decision during collections. The CAP is also available for a wider range of collection disputes. For instance, you can’t request a CDP hearing until you get a specific notice from the IRS saying you have this right. You’ll usually get this notice towards the later stages of a lien or levy collection action.

A benefit of a CDP hearing is that you can appeal the decision to the U.S. Tax Court if you disagree with it. In contrast, the decision from the CAP is binding on both you and the IRS, although this can be a good thing if you win your CAP appeal. Another advantage of the CDP hearing is that you can usually use it to dispute a penalty, unlike with the CAP. 

What If You Agree With the IRS But Can’t Pay What You Owe?

There are situations where you might agree with the IRS and therefore not want to file an appeal. However, you might have no way of paying off your entire tax debt immediately. This is a common situation and you’ll have other options that provide more time to pay your tax balance and/or reduce how much you owe the IRS. Some of these options include an Offer in Compromise, payment plans and installment agreements, and Currently Not Collectible status. 

Need Help Filing an Appeal or Disputing an IRS Decision? 

Fighting the IRS trying to collect a tax debt from you isn’t easy. Even if you have a legitimate reason to argue the IRS is wrong, figuring out how to file a dispute or appeal with the IRS can seem daunting. In other cases, it can sometimes be as simple as making a telephone call and explaining your situation. 

But how do you know which situation applies? That’s where the experienced tax professionals of Seattle Legal Services, PLLC come in. We can help you figure out the best approach to your tax concern and whether you need our help or can handle things on your own. Set up a consultation today by calling us at 425-428-5262 or using our online contact form.