After a taxpayer receives a Notice of Federal Tax Lien or a Final Notice of Intent to Levy, he/she/it has the right to challenge the collection action in a Collection Due Process Hearing (a CDP hearing). In a Collection Due Process hearing, the taxpayer may raise issues such as:
1) The validity of procedural steps leading to the hearing.
2) Issues related to unpaid tax liabilities.
3) Challenges to the proposed collection action (i.e. liens or levies).
4) Alternate collection action.
5) Issues related to the intrusiveness/efficiency of the collection action.
The right to a Collection Due Process hearing only arises after the filing of a Federal Tax Lien, however, the right to the hearing arises before the IRS actually levies on the assets of a taxpayer.
The result of a Collection Due Process hearing may be the avoidance of the forced collection action. However, the result of the hearing can be the IRS’ determination that the collection action (lien or levy) is appropriate and then the IRS will move forward on that action.
Take note, however, that if a taxpayer plans to challenge collection in a Collection Due Process hearing, he/she/it must have a non frivolous reason for doing so. Additionally, a hearing cannot be requested if it is simply a means to delay collection of the tax. Using a Collection Due Process hearing to make a frivolous argument or as a delay tactic can result in monetary penalties.