Appealing an IRS or Federal Tax Lien: How, What, and Why
The first time the IRS files a tax lien for a specific type of tax and period, the agency has five business days to send you a “Notice of Federal Tax Lien and Your Right to a Collection Due Process Hearing.” The notice tells you the lien has been filed and gives you the option to request a “Collection Due Process” or CDP hearing within a date specified in the letter.
If you want to appeal, you have two appeals options or procedures available: Collection Due Process (CDP) and Collection Appeals Program (CAP). The IRS Office of appeals utilizes each under different circumstances.
When You May Consider Appealing an IRS Tax Lien
There are a few different situations where the IRS may release a lien. If your circumstances meet any of the following criteria, you may want to appeal the tax lien:
- You paid the taxes in full before the IRS filed the tax lien
- Withdrawal, subordination or discharge of the tax lien
- The IRS made an error in the lien filing process. For example, if the IRS failed to send you a notice before placing the tax lien, you can usually get it removed.
- You are filing bankruptcy, and the taxes are subject to an automatic stay.
- The statute of limitations expired on the debt before the IRS filed the lien
- The IRS never offered you a chance to dispute the amount owed.
- The IRS made a processing error and mistakenly filed a lien in your name.
- Your spouse is exclusively responsible for the tax debt, and you want to apply for innocent spouse relief.
- You want to explore different collection options such as an offer in compromise or an installment agreement.
How and When to Request a CDP Hearing with the Office of Appeals
If you receive a “Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320,” or IRS Letter 3172, you can request a CDP hearing with the Office of Appeals by completing IRS Form 12153, “Request for a Collection Due Process or Equivalent Hearing.” Alternatively, you can send a written request for a hearing with the same information required on that form. Include a copy of the tax lien notice you received.
You must make your request for a CDP within 30 days after the 5-day business timeframe for the lien filing. You can also appeal by asking an IRS manager to review your case. If you win the appeal, the IRS will decide whether to keep the tax lien in place or release, withdraw, discharge or subordinate it.
On Form 12153, you need to specify if you want a lien subordination, discharge, or withdrawal. A tax lien subordination is when the IRS agrees to let liens from certain creditors take precedence over the IRS concerning priority. A tax lien discharge is when the IRS releases the tax lien from certain assets—if you sell those assets, you don’t have to give the funds to the IRS. A withdrawal is when the IRS completely removes the lien from your credit report and the public record. You must also explain why (whatever your request) the IRS should subordinate, discharge, release and withdraw the tax lien.
If you want to make arrangements for your personal or business tax debt, you can specify that on Form 12153 as well. That includes an installment agreement and an offer in compromise, but you can also let the IRS know if you cannot pay the balance. Finally, you may note that your spouse was solely responsible for the tax debt, or you can offer other reasons why the lien should be released. If you write a letter, you need to include all of that information as well.
In some cases, you can work out an arrangement with the collection office who sent you the notice. Call the phone number on the IRS letter and explain why you disagree with the tax lien. Note that this phone call does not increase the amount of time you have to make a formal appeal. If an IRS agent or a representative resolve your issue over the phone, you can cancel your request for a hearing. To be on the safe side, you should also submit a written request for an appeal hearing. Remember, you get one hearing related to an NTFL for each taxable period.
What Happens After You Request a CDP or Equivalent Hearing With the Office of Appeals?
Once the IRS Office of Appeals receives your form or letter, the office will contact you to schedule a meeting. The initial conference with appeals takes place over the phone, by correspondence or face-to-face if you qualify. After that, you may receive additional letters or have other meetings with IRS appeals.
After the hearing has finished, the Office of Appeals will issue a determination letter. If the appeal goes in your favor, the IRS may grant your request to release, withdraw, subordinate or discharge a tax lien. However, the Office of Appeals may decide the tax lien should remain filed.
If the IRS Office of Appeals denies your request, you can request a judicial review from the U.S. Tax Court. You have to petition the court within 30 days of the date the Office of Appeals issues the determination letter. However, usually, it is specified in the letter. If you fail to respond in time, you cannot go to court even if you do not agree with the decision from the Office of Appeals.
Failing to Request a CDP Hearing in Time
If you fail to request a CDP hearing by the 30-day time frame, after the five business day period, you can ask for an “equivalent hearing” using the same form. Be sure to check the equivalent hearing box, which is line 7 on Form 12153 or write a letter. You must request it on or before the end of the 1-year period plus five business days after the filing date of the Notice of Federal Tax Lien.
How and When to Request a Collection Appeals Program (CAP) Hearing
A taxpayer can utilize the CAP program before or after the IRS files a Notice of Federal Tax Lien. In other words, you can appeal a proposed or actual filing of an NTFL under the Collection Appeals Program (CAP). You may also get a hearing on a denied withdrawal, subordination, or tax lien discharge. Although the CAP process is much faster than utilizing other appeals processes, you cannot go to court if you disagree with the determination. Moreover, you cannot challenge the existence or amount of your tax debt.
No Revenue Officer Contact – Just a Letter or Telephone Call
If you received a letter, call the number on the notice and explain why you do not agree with the tax lien. Offer a solution. If you cannot reach an agreement with the IRS representative, state you want to appeal, and they should get a manager on the phone within 24 hours. If there is still a disagreement, the IRS manager will forward your case on to appeals. In this case, you will not need to submit a request in writing.
Revenue Officer Contact
If you differ with a revenue officer assigned to your case, you can request a conference with the Collection Manager. If you disagree with the Collection manager’s decision, you can submit Form 9423, “Collection Appeal Request” to that collection office within three business days after your conference with him or her. You need to let the revenue officer know you want a CAP appeal within two business day after your meeting with the Collection manager.
If you request a conference with a Collection Manager and the IRS does not contact you within two business days of the request, you can reach out to Collection again or submit Form 9423. If you decide to submit the form, note the time of conference request in Black 15 and indicate that an IRS conference manager or subordinate did not call.
Who Can Represent Me in an Appeal for a Federal Tax Lien?
When appealing a tax lien through a CDP Hearing or Equivalent Hearing, the following people can represent you:
- Tax Attorney
- Certified Public Accountant
- Enrolled Agent
- Member of Your Immediate Family
- For Business Taxes: Full-Time Employees, General Partners, or Bona-Fide Officers
- Low-Income Tax Clinic (If You Qualify)
Although you can represent yourself, your chances of success are a lot higher with an experienced tax professional. The IRS prefers to work with qualified tax professionals. That usually results in a resolution for both parties quickly because tax professionals understand the process better than most individuals.