The Internal Revenue Service (IRS) may levy your assets, seize your property, and issue a federal tax lien if you have unpaid taxes. A Collection Appeal Program (CAP) can be requested by taxpayers to challenge a collection action by the IRS. This procedure provides an alternative avenue to collection.
When is the Collection Appeal Program Available?
A CAP request must be submitted in writing to the IRS using Form 9423. However, before submitting a CAP request, the IRS prefers that you try to resolve the dispute by meeting with an IRS Collections Manager. If you do not agree with their decision, you can move forward with filing the form. The Collection office must be notified within two (2) days of the meeting.
A CAP can typically appeal the following collection actions:
- Rejection of an Offer in Compromise (though there is a separate form that shouldbe filed to appeal a rejection of an Offer in Compromise)
- A federal tax lien
- A denial of a request for lien subordination, withdrawal, non-attachment, or discharge
- Bank levies, property seizure, or wage garnishment
- A rejection of a request for an installment agreement or changes to one
- Termination of an installment agreement
- Disallowance of a request to return property levied
While the Form 9423 only requires limited information, a specific section requires you to provide the reasons you are disputing the collection action. You should provide any supporting documentation. Once the IRS receives the Form, the Internal Revenue Service will stop collection activity until it has reviewed the request and makes a decision. the IRS will then contact you to schedule a hearing.
What Happens at a CAP Hearing?
Each type of CAP hearing is different — the process and time frame for filing will depend on the nature of the appeal and the status of the taxes owed. CAP hearings are informal and conducted by telephone conference. The matter will be heard by a Settlement Officer who will determine whether the IRS took the proper legal steps in the action subject to the appeal.
The decision rendered at a CAP hearing is final. You cannot appeal the outcome of a CAP to the tax court. In limited circumstances, you may obtain a judicial review of the determination. For example, a third party might have the right to challenge a wrongful levy in court. However, most appeals that go through this process cannot be appealed again.
How is a CAP Different From a CDP?
Although both requests are used to appeal an IRS decision and halt a collection action, there are several crucial differences to note between a CAP and a Collection Due Process (CDP) hearing. A CAP is more expansive and applies to a wide range of collection actions, while a CDP is more restrictive. Sometimes, you might only have the right to a CAP, but in other situations you may choose between the two procedures.
With a CAP, you typically dispute the actual collection action, rather than the specific underlying penalty from which the enforcement action arose. CAP requests are usually reviewed fairly quickly — the CDP process can be lengthier. Unlike with a CDP, a CAP is immediately available. You need not wait until the IRS issues a final notice to pursue a CAP. The CAP may appeal both current and proposed collection actions.
Contact an Experienced New York Tax Attorney
An IRS collection action can be stressful and it’s important to understand your options. It’s best to have the representation of a skillful tax attorney who can advise you and ensure your interests are protected. Brinen & Associates offers crucial guidance for clients regarding a variety of tax matters at both the state and federal levels. Call (212) 330-8151 or send us a message to learn more about how we can assist you.