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MLI #1: Appeals From Collection Due Process (CDP)

Hearings Under IRC §§ 6320 and 6330

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION MLI #1-1

Use its internal data pertaining to a taxpayer’s income and assets compared to his or her Allowable Living Expenses to determine if a taxpayer is in economic hardship or qualifies for a collection alternative, such as an offer in compromise, prior to issuing an intent to levy notice or NFTL.  Working with taxpayers ahead of time could negate the need for further collection action.

IRS RESPONSE TO RECOMMENDATION: Consistent with sections 6320 and 6330 of the Internal Revenue Code, the IRS provides taxpayers with notice of, and an opportunity for, a Collection Due Process (CDP) hearing after a Notice of Federal Tax Lien (NFTL) is filed and before a notice of levy is issued. Letter 3172 is the CDP notice of the NFTL filing, and Letter 1058 or Letter LT11 is the CDP notice of the intent to levy.

CDP notices are not automated notices, but rather are issued after we have mailed several automated notices and the account has remained unresolved. We then analyze the case (using data such as the taxpayer’s income) to decide if it is a high priority and should be assigned to a Collection function. The assigned Collection function then attempts to contact the taxpayer and makes the determination that issuing the CDP notice is the appropriate next action because the taxpayer has not responded, or they have been unable to resolve the case. At the point that we issue the Notice of Intent to Levy and Your Right to a Hearing or initiate the filing of the NFTL, therefore, we have already provided the taxpayer an opportunity to work with us on collection alternatives. Accordingly, we do not agree to implement TAS Recommendation MLI #1-1.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS appreciates the work that goes into determining if the IRS should issue an intent to levy notice or an NFTL. However, the current analysis focuses on if the case should be pursued, if the taxpayer has responded, etc. We recommend that the IRS use internal data not to categorize the case for collection potential but to flag cases that would make good candidates for hardship identification or collection alternative, regardless of involvement with the taxpayer up to that point. For instance, flagged cases for hardship could avoid receipt of an intent to levy notice or an NFTL. Predetermining the appropriate collection alternative would put data to use that may already be available, thereby saving resources and ensuring the right to quality service.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION MLI #1-2

Revise CDP notices so that the CDP hearing aspect is a separate notice from the collection portion of the notice. Provide the taxpayer an understanding of what a CDP hearing is and why a taxpayer would want to request a CDP hearing.

IRS RESPONSE TO RECOMMENDATION: With regard to TAS Recommendation MLI #1-2, the CDP notices have been revised several times throughout their 21-year history, with the concurrence of TAS, to enhance their clarity and incorporate modifications to the law.

In response to a prior year TAS recommendation, the IRS partnered with TAS to redesign a number of collection notices, including Letters 1058 and LT11. We created a new heading in the Letter 1058 to explain CDP hearing rights (“How to Request an Appeals Hearing”), and we bolded key concepts and due dates for submission of these requests. The re-designed LT11 similarly features a separate section titled “How to Request an Appeals Hearing,” with key due dates highlighted. We tested several prototypes of the LT11 and will place the revised version into production this year. One of the goals of this notice redesign initiative was to better enable taxpayers to make an informed choice as to their options. Our tests of the redesigned LT11 showed that more taxpayers paid their liabilities and a higher percentage of taxpayers requested CDP Hearings. The goal of informed choice is being met by our current practices and the structure of our notices. Therefore, we decline to further redesign or restructure our CDP notices.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS values the opportunity to work with the IRS to revise CDP notices. The IRS has adopted several of TAS’s recommendations, which will help taxpayers. However, we believe combining CDP rights with a collection notice complicates an already confusing process for taxpayers, and highlighting new subheadings does not remedy this. The revisions, which TAS acknowledges as improvements from the prior versions, remain within the context of a demand for payment, which seems to overshadow the importance of the notice that grants the taxpayers’ one-time right to request a CDP appeal. The separate CDP notice should explain what a CDP appeal is and why a taxpayer would want to request one. In lieu of a separate CDP notice, we agree that the IRS’s recent changes will mitigate some taxpayer confusion.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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