IRS Collection Appeals Program (CAP) & Form 9423
Collection actions by the Internal Revenue Service (IRS) can have disastrous consequences for both individuals and businesses. Many taxpayers believe that they lack any recourse to either prevent IRS action or challenge a collection that has already occurred. However, there are some important and powerful remedies available to taxpayers in such cases. One option is known as the Collection Appeals Program (CAP). In this article, we discuss what the Collection Appeals Program, when a taxpayer can use it, and the closely related appeals program known as Collection Due Process (CDP).
How Does the Collection Appeals Program Work?
The Collection Appeals Program (CAP) is one of two appeals programs available to taxpayers to challenge IRS collection actions. The Program allows the taxpayer to appeal a collection action before or after certain IRS actions. The taxpayer can also use CAP in connection with issues arising under installment agreements. It is essential to note taxpayers cannot challenge the underlying tax liability in a CAP. Moreover, the taxpayer cannot appeal an adverse decision made in the CAP.
Actions the Collections Appeals Program is available for
The Collection Appeals Program can be used to appeal the following types of collection actions:
- A Notice of Federal Tax Lien (NFTL) that was either filed or will be filed by the IRS.
- A wage garnishment (or levy on your wages) that the IRS has already attached to your wages, meaning that your employer is deducting money from your check each pay period, or a levy that will be issued
- A bank account garnishment (levy against your bank account) that has already been executed or will be in the future
- A seizure of property that has already occurred or is in the process of happening. The appeal must be brought before the property is sold
- Requests to issue lien certificates (i.e., withdrawal, discharge or non-attachment) has been denied
- For installment agreements where there has been a proposed or actual rejection, termination or modification of the installment agreement
Notice of Federal Tax Lien
A Notice of Federal Tax Lien alerts creditors that the government has a legal right to your property. The government’s lien attaches to property you own and even to property you may acquire after the Notice was filed. A tax lien can have a significant impact on your credit and the ability to sell assets. Even though tax liens do not show on credit reports anymore, creditors still use alternative methods.
Any Type of Tax Levy
A tax levy is the subject of the second, third, and fourth bullet points above. As a general matter, the IRS cannot seize your property unless it first provides you with advance notice. A Notice of Intent to Levy, it is a written notice that the IRS intends to seize your property. The IRS must send the notice must at least thirty (30) days before seizing your assets and must explain the reason for the seizure, as well as explain your appeal rights.
Installment agreements are where the IRS agrees to accept payments of back taxes over a period of time paid in monthly installments. There are several different types of installment agreements, including guaranteed, partial payment, streamlined, and non-streamlined. The IRS will notify you in writing if your proposed installment agreement is not accepted or if your existing installment agreement has been modified or terminated due to a default. Once you receive the notice from the IRS you can challenge the decision through the CAP.
What is the process for filing an appeal under the Collection Appeals Program?
The process depends largely on the current status of the tax debt and the nature of the appeal. When the IRS assigns your case to an IRS Revenue Officer, you must first notify the Officer that you want to appeal the decision. If the Revenue Officer does not agree with the reasons for your appeal, you will then have a chance to talk to the Revenue Officer’s Manager. In a situation where the Manager also disagrees with you, then you have 48 hours to file a Collection Appeal Request (IRS Form 9423).
If, however, your case has been assigned to the Collections division, you must first contact them using the number listed on the official notice that you received from the IRS. You must explain the reasons for your appeal, and if denied, then you must notify the Collections Manager of your intent to file Form 9423. You must postmark the completed form within three business days of the conference with the Collections Manager.
For an installment agreement, however, it is not necessary to lodge an informal appeal prior to filing Form 9423. You must file the form within 30 days from the date listed on the notice advising you of a rejected proposed installment agreement. If the IRS terminates an installment agreement, the timeline to file a CAP is 76 days.
How to file IRS Form 9423
Form 9423 requires somewhat limited information, mostly basic personal and contact information. There is a section that requires you to list the reasons that you disagree with the collection action. As a general matter, it is easier to provide a detailed explanation on a separate sheet of paper and attach it to your Form. The Form must period to the IRS within the timeframes listed in the above section.
What should I expect after I file Form 9423?
One immediate benefit of filing a CAP appeal is that the IRS will generally stop the collection action until the Appeal has been resolved. There are some exceptions to this, like if the IRS believes that you will attempt to dispose of assets, but in the vast majority of cases, you will get some temporary breathing room.
The IRS reviews CAP appeals quickly. The IRS will schedule a telephone conference with you within several days of reviewing your appeal. At the Appeals conference, you are free to represent yourself or an attorney, certified public accountant (CPA) or any person authorized to practice before the IRS may represent you. If you wish to have a representative attend, you must file a completed Power of Attorney Form 2848 prior to the conference.
Difference CDP and CAP Appeal Programs
The primary difference between a CDP and CAP appeal is one of timing. Unlike a CAP, the taxpayer cannot appeal a proposed collection action with a CDP. For instance, a taxpayer could not file a CDP before a Notice of Federal Tax Lien has been filed. Moreover, unlike a CAP, filing a CDP will not put a stop to IRS collection actions. The main reason for this is that a CDP takes substantially longer to resolve than a CAP. The IRS does not want to put off collection for that length of time. Finally, you cannot appeal installment agreements via a CDP.
The Collection Appeals Program can be an effective method for appealing and even ceasing IRS collection actions. To be sure, the requirements and procedures for filing an Appeal through the CAP can be complex. If you are facing IRS collection action, contact an experienced tax professional today to discuss your options.