Appealing a Levy – Advantages and Disadvantages of Each Method

There are many differences to be considered in determining which of administrative appeal to use. One of the most important differences concerns the right of review. A determination in a CDP hearing may be appealed to the Tax Court, but there is no right to judicial review in the CAP or TAO process.

An important disadvantage of the CDP is that the taxpayer must request a hearing within the 30-day period beginning on the day after the date he receives notice of his right to a hearing. This time limit cannot be waived, however, a written request submitted within the 30-day period that does not satisfy content requirements is considered timely if the request is perfected within a reasonable period of time. If the request for a CDP hearing is untimely, either because the request was not submitted within the 30-day period or not perfected within the reasonable period provided, the taxpayer will be notified of the untimeliness of the request and offered an “equivalent hearing.” But an equivalent hearing does not suspend any collection action against the taxpayer and no judicial review of the hearing determination is available.

In contrast, both the TAO and CAP are not subject to a time limit tied to the notice of levy and are available both before and after a levy is imposed on property. Both the TAO and CAP are also generally quicker procedures than the CDP.

There are also significant differences in the types of problems that can be considered under each process. Under the CDP process, a taxpayer may contest the underlying tax liability if certain conditions are met, while such a contest is not possible in the CAP or the TAO. On the other hand, the CDP process is not available to nominees of, persons holding property of, or
persons holding property with respect to, the taxpayer, but such persons may use the TAO or CAP. Another distinction is that IRS will not consider trust fund recovery penalties, offers in compromise, or other penalty appeals under CAP procedures.

A $5,000 penalty is imposed on any person who submits a request for a CDP hearing or an application for a TAO (or submits any one of certain other types of specified submissions) if any portion of the submission is either based on a position which IRS has identified as frivolous, or reflects a desire to delay or impede the administration of federal tax laws. However, the penaltyis clearly aimed at those who abuse the process and should not deter taxpayers with legitimate disputes from using the CDP or TAO process.

© 2011 Thomson Reuters/RIA. All rights reserved.

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