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What is a CDP and When Does It Apply?

On Behalf of | Oct 31, 2023 | Blog |

A CDPH is an administrative hearing held before the IRS Office of Appeals (“Appeals”) offered only once per tax period for a lien and once for a proposed levy action.  Prior to taking forced collection action and shortly right after a lien is filed, the IRS allows a taxpayer to protest the action proposing an alternative resolution to the tax obligation before the IRS Office of Appeals. CDP essentially adds two additional layers of review.  First, it temporarily gets the matter out of your Revenue Officer’s hands.  Second, it provides for judicial review.  Should you be dissatisfied with Appeals’ overall determination, you can appeal to the United States Tax Court (“USTC”). When tax court rights are available, the Appeals Officer is more reasonable.

The IRS only provides 30 days to respond from the moment the letter granting said rights is sent.  When filed timely, the CDP temporarily stops the time the IRS has to collect the tax, also known as the Statute of Limitations (“SOL”) on collection.  The tolling of the statute starts from the time the CDP request is timely filed to when a final decision is rendered.  Should you miss the 30-day window, you have 1 year to avail yourself of an Equivalency hearing which provides for only 1 level of review and no tolling of the SOL.

It is important to remember that when multiple periods are involved, even if you avail yourself of timely filed CDP rights, you must keep your eye on the other periods outside of CDP.  This is because the IRS still has the ability to continue to collect on these periods.  And when the collection statute is about to run (meaning the IRS is running out of time to collect), it will do all it can to secure payment.  Hence, you might find yourself attempting to resolve your matter on multiple fonts.  The Appeals Officer and the Revenue Officer assigned are to work together and ideally the work they each do is in tandem with the other and not at cross purpose.