IRS TAX CONTROVERSY & APPEALS

Potential Techniques for Settling/Resolving an IRS Tax Dispute/Controversy

OFFER IN COMPROMISE

The IRS’s Offer in Compromise (OIC) program allows eligible taxpayers to settle their tax liability for less than the full amount owed. To qualify for the program, the taxpayer must be able to demonstrate (1) doubt as to liability, (2) doubt as to collectibility, or (3) effective tax administration. In other words, the taxpayer must prove a legitimate, desperate financial hardship and that the IRS would be unable to collect a higher amount in a reasonable period of time. The IRS considers the taxpayer’s income, expenses, equity, and ability to pay.  There are additional OIC program requirements and an OIC may not be the best negotiating choice for everyone, as an OIC is a contract that must be performed in full, and a taxpayer’s failure to abide by the offer and its terms may result in the IRS placing the taxpayer in default, issuing a federal tax lien, levying interest and penalties, etc.

INSTALLMENT AGREEMENT

With an installment agreement, a taxpayer makes a payment plan to pay each month in installments over time the full amount of the assessed tax liability. Although with an installment agreement (IA) you must pay over an extended period of time the taxes you owe, one benefit is that, in general, while the IA is pending/being reviewed, the IRS is prohibited from levying against your assets. But as with an OIC, under an IA, you must honor the terms of the IA and not default. If the IRS approves the IA, entry into the IA program may require a user fee, in addition to any accrued fees, interest, and penalties that you will need to pay.

Note that you may be able to enter into a payment plan (IA) if you cannot pay in full and when due the amount owed on your tax return, before the IRS initiates action against you. Also note that you may want to explore other options (i.e., loans, borrowing), as interest and penalties continue to accrue during the IA, until the balance owed is paid in full.

Businesses, too, are eligible for IAs.

COLLECTION DUE PROCESS

IRS collection due process (CDP) is a taxpayer’s right (including businesses) to appeal certain IRS collection actions. As the name implies, it is a procedural mechanism that ensures constitutional procedural due process (the right to notice and a fair hearing before the IRS deprives you of your property). Some IRS collection efforts, however, qualify for the Collection Appeals Program (CAP) or other appeals proceeding, and using one program over another may preclude a taxpayer’s ability to use another program. With CDP, you will be afforded for each assessment within a tax period one hearing at the Independent Office of Appeals (IOA), will have the opportunity to contest the IRS’s collection efforts and procedures, can discuss potential alternatives for collecting the tax owed, and, depending on the particular facts, may be able to contest other issues, including but not limited to the existence or amount of the tax (if you did not receive the required notice). Unlike the CAP process, however, one potential benefit of CDP is that, if you disagree with the outcome of the CDP hearing, you may contest the CDP determination in the U.S. Tax Court. However, in general, to request a CDP hearing, you must first receive from the IRS a Notice of Intent to Levy and Your Right to a Hearing or Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. 

You do not need to wait until the IRS liens, levies, or, worse, “Seizes” your property. If you’ve received from the IRS a CP504 Notice or any notice regarding your taxes or otherwise believe you or your business may have an unresolved IRS problem, do not wait: Call tax controversy and appeals attorney Ryan J. Casson and determine which appeals process may be available to you.

APPEALS TO THE U.S. FEDERAL COURTS

In addition to the above programs (OIC, IA, CDP, and CAP), there are other appeals processes, including but not limited to paying the amount in full and then filing a claim for a refund (if the refund is disallowed, you can appeal) and requesting Audit Reconsideration. After completing particular appeals processes and jumping through many hoops, though, you may be able to appeal further in the U.S. Tax Court or an appropriate U.S. District Court. Two of the most common types of cases appealed to the U.S. Tax Court are (1) CDP appeals, as mentioned above, and (2) deficiency proceedings (where, after an audit, the IRS assesses additional tax in a Notice of Deficiency). An appeal from a Notice of Deficiency resulting in additional assessed tax following a deficiency proceeding must be filed with the U.S. Tax Court within 90 days of the mailing of the letter; an appeal from a Notice of Determination following a CDP proceeding must be filed within 30 days of the mailing of the letter. With appeals, time is not your friend; appeals deadlines, jurisdictional requirements, and procedural requirements must be followed.

From the IRS and the IOA to the U.S. Tax Court, federal district and appellate courts, and the U.S. Bankruptcy Court for the Central District of CA, Camarillo tax attorney Ryan J. Casson can work to litigate and resolve tax controversies for individuals, businesses, executors, trustees, and other fiduciaries.

Contact the Law Office of Ryan J. Casson in Camarillo for help preventing or resolving an IRS or California taxing authority audit or if you need assistance navigating through income, estate, or gift tax audits and appeals, or tax issues in bankruptcy.