By Rick Yandle, Esq., CPA — federal criminal & civil tax defense
There is a particular way to lose a collection case that has nothing to do with being wrong on the facts. You lose it by staying quiet, by not raising the argument, not proposing the alternative, not turning in the financial information, and then discovering, too late, that a court will only review the record you actually made. In Collection Due Process, silence is not neutral. Silence is a decision, and often a losing one.
What Collection Due Process is
When the IRS files a Notice of Federal Tax Lien or sends a final notice of its intent to levy, the taxpayer has a valuable right most people do not know they have: the right to a Collection Due Process hearing before the IRS Independent Office of Appeals (26 U.S.C. Section 6320 for liens, Section 6330 for levies). This is the taxpayer's structured opportunity to be heard before the collection machinery grinds forward.
Timing is everything here. File your request by the deadline printed on the CDP notice (using Form 12153) and you get a true CDP hearing, with the right to petition the Tax Court if Appeals gets it wrong. Miss that deadline and you may still get an "equivalent hearing," but you generally lose the judicial-review backstop. The first deadline in a collection case is often the most important one in it.
What you can actually accomplish there
A CDP hearing is where the real work of collection defense happens. It is the forum to propose collection alternatives, an installment agreement, an offer in compromise, or currently-not-collectible status, to challenge whether the proposed collection action is appropriate and no more intrusive than necessary, and, in limited circumstances, to dispute the underlying liability itself if you never had an earlier chance to.
But every one of those opportunities has to be taken. Appeals decides on what is put in front of it. Which brings us to the trap.
The record is the case
When a taxpayer appeals an unfavorable CDP determination to the Tax Court, the court does not start over and re-decide everything fresh. It generally reviews whether Appeals abused its discretion, and it does that by looking at the record that was built during the hearing. If a collection alternative was never proposed, there is nothing for the court to say Appeals wrongly rejected. If the requested financial information was never submitted, Appeals did not abuse its discretion by declining to grant relief that the taxpayer never substantiated. And if Appeals identifies a possible source of payment, say, an owner who could borrow against home equity and lend the proceeds to the business, and the taxpayer never responds with the requested evidence or objections, a court generally cannot fault Appeals for deciding the case on the information it had.
This is why "silence costs you the case." Appeals cannot grant what you do not ask for, and the Tax Court cannot fault Appeals for failing to consider what you never presented. A hearing where the taxpayer shows up empty-handed, misses deadlines for financial submissions, or declines to engage with alternatives is a hearing that builds the record for the IRS.
The practical takeaway
Treat a CDP hearing as the place where the case is won or lost, not a formality on the way to something else. That means calendaring the 30-day deadline the moment a lien or levy notice arrives, deciding affirmatively which alternatives to put forward, and getting the supporting financials in, completely and on time. The goal is to make a full record, because the record is what a court will one day review.
A note for referring counsel
If a client has received a lien or levy notice, the 30-day CDP window and the quality of the record made at the hearing can determine everything that follows. I am glad to consult with counsel on preserving CDP rights and building a hearing record that holds up on review.
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