The ability to file a collection due process appeal is probably the most powerful right you have in defending against IRS enforcement by levy or seizure.
Due process, in the context of IRS collections, means the right to reach resolution of your case before the IRS can take your property, and the right to have an outside party – the U.S. Tax Court – review the collection decisions of the IRS before they can take place.
Due process in collection cases begins with the IRS sending you a Final Notice of Intent to Levy. Within 30 days of this notice, the rights of due process allow an administrative appeal to be filed with the IRS, disputing the intent to levy. While the appeal is pending and solutions are negotiated, the IRS cannot levy or seize your property by law.
Resolution is made with an IRS settlement officer, whose job is to, well, settle collection cases. Collection due process can level the playing field, so to speak.
Sometimes it can be better to actually file the collection due process appeal late, more than 30 days after the Final Notice of Intent to Levy was mailed.
Late filed collection due process appeals are called “Equivalent Hearings.” Although equivalent hearings are not absolute and are provided on a case by case basis, the Internal Revenue Manual guides the IRS to process the late appeals and provide full appeal rights to the taxpayer’s benefit, including a hold on seizure and levy. Late filed appeals are accepted up to one year after the Final Notice of Intent to Levy was sent. Internal Revenue Manual 126.96.36.199.6 and Treas. Reg 301.6330-1.
The primary difference between timely and late filed collection due process appeals is the right to go to Tax Court. It is lost in late filed appeals.
However, collection due process appeals can offer situations where late-filing with the Internal Revenue Service can actually be advantageous. Counterintuitive, but true.
There are real benefits to filing an collection due process appeal late and requesting an equivalent hearing with the IRS. Here are two good reasons to file it late:
1. No tolling of the statute of limitations on collection.
The IRS has 10 years to collect a tax liability. During the hold on enforcement caused by timely filed collection due process appeals, the 10 year IRS statute of limitations on collection is tolled. Time stops running when the tax code prevents the IRS from levying or seizing property.