CATax highlights: CDP information & a bitcoin breakdown.

• Author: Klasing, David W.
• Position: CATax

Before the IRS levies the property (or the right to property) of a taxpayer, the Secretary of the Treasury must notify the taxpayer of their right to a hearing before the levy is made [IRC Sec. 6330(a)]. The notification must include information such as the amount to be levied, the proposed action by the secretary, the provisions of Sec. 6330, administrative appeals available to the taxpayer and steps that the taxpayer can take to avoid the levy (such as an installment plan).

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If a taxpayer receives notice of a levy and files an administrative appeal, which is frequently the case, the hearing is held before the IRS Office of Appeals. The taxpayer has a right to have their hearing conducted by an Appeals officer that has not had any previous involvement with regard to the unpaid taxes that have given rise to the levy.

Issues that can be raised at such a hearing include any relevant issue to the unpaid tax or the proposed levy including spousal defenses, challenges to the appropriateness of the collection process and offers of alternatives to the current levy (such as the posting of a bond, substituting levied assets for other assets, an installment agreement or an offer-in-compromise).

Finally, the taxpayer may raise a challenge to the underlying tax liability if the taxpayer did not receive statutory notice of the deficiency or did not otherwise have an opportunity to dispute such liability. If the taxpayer receives an unsatisfactory result at the hearing before the Office of Appeals, they may petition the U.S. Tax Court to review the Appeals officer's decision.

In lames v. Commissioner [No. 16-1154 (4th Cir. Mar. 7, 2017)], the taxpayer engaged in conduct that resulted in a reporting violation, yielding a civil penalty. Prior to the tax being assessed, the taxpayer filed a protest with the Office of Appeals. Counsel for the taxpayer requested documentation from the Appeals officer, but attempts to respond to the taxpayer's counsel went without reply.

The Appeals officer closed the case and the IRS assessed the tax. When the IRS attempted to collect the tax from the taxpayer, they sent a notice of the intent to levy. Pursuant to Sec. 6330, the taxpayer initiated a hearing at the Office of Appeals in an attempt to dispute the underlying tax liability.

The Office of Appeals sustained the IRS collection action, stating that the taxpayer had already had the opportunity to raise substantive arguments regarding the...