Appealing an IRS or Federal Tax Lien: How, What, and Why

You can appeal an IRS tax lien in three different ways: Collection Due Process (CDP) hearing, Equivalent hearing, or Collection Appeals Program (CAP). The IRS Office of Appeals utilizes each program under different circumstances. To protect your rights, make sure that you understand the deadlines and unique pros and cons of each of these options -- or use TaxCure to find an experienced tax resolution professional to help you. 

Table of Contents

• Why consider appealing a tax lien
• Collection Due Process Hearing
• Equivalent Hearing
• Collection Appeals Hearing 
• Who can represent you? And how to find help with tax liens

When You May Consider Appealing an IRS Tax Lien

There are a few different situations where the IRS may release a lien. If your circumstances meet any of the following criteria, you may want to appeal the tax lien:

• Already paid in full -- You paid the taxes in full before the IRS filed the tax lien
• IRS procedural error -- The IRS made an error in the lien filing process. For example, the lien was issued in the wrong name, amount, or against the wrong assets.
• Bankruptcy stay -- There is a stay in place due to you being in an active bankruptcy case, and the IRS filed the lien in spite of that.
• Expired collection period -- The statute of limitations expired on the taxes before the IRS filed the lien.
• Incorrect tax assessment -- The IRS never offered you a chance to dispute the amount owed; This option may only be available if you appeal with a CDP hearing by the deadline.
• Spousal defense -- Your spouse is exclusively responsible for the taxes, and you want to apply for innocent spouse relief.

You can also use the appeals process to set up payment arrangements or request specific actions with the tax lien. Even if you agree with the amount of tax due and understand why the IRS filed a tax lien against you, you may want to appeal so that you can talk with the IRS about resolution options. That said, you should not enter a frivolous appeal just to buy time -- you should be ready to talk about solutions during the meeting. Although these are called appeals hearings, most are informal conferences that happen over the phone.

Here are some resolution options that you may want to suggest when you appeal, with brief descriptions and links to pages with more info:

• Installment agreement -- The IRS will generally approve monthly payments if you owe less than $50,000 and can pay off the balance before it expires. If you owe more than that, you will need to provide a collection information statement to qualify for a payment plan. If you owe less than $25,000, you can pay off the balance in 5 years (or by the expiration date if sooner), and you set up direct debits, the IRS will withdraw the tax lien from the public record once you make three monthly payments.
• Offer in compromise -- If you don't have enough assets or disposable income to pay in full or make payments, you may qualify for a settlement. If you request this option during the hearing, Appeals may try to briefly pre-qualify you, and then, they'll have you submit the OIC application paperwork. If you get approved, the IRS will release the lien when you satisfy the terms of your agreement. Release means that you no longer owe the tax associated with the tax lien.
• Lien withdrawal -- A lien withdrawal is when the IRS removes the public record of the lien. typically, that means pulling back the Notice of Federal Tax Lien, but if you haven't paid in full yet, you will continue to owe the tax. Generally, you'll only qualify for a withdrawal if you pay in full and get the lien released, or if you set up a direct debit installment agreement as noted above
• Lien subordination -- This is when the IRS lets its lien fall in priority behind another creditor. You may want to think about this option if you want to refinance or take out a loan against an existing asset so that you can pay the tax debt. You may also want to consider this if you want to refinance your mortgage to lower monthly payments so that you can make larger monthly payments on your tax liability. 
• Discharge of the tax lien -- A discharge is when the IRS removes the lien from a defined piece of property. For example, you may ask the IRS to remove the lien from a vehicle, RV, boat, motorcycle, or real estate so that you can sell the asset to pay off the debt. However, people also request discharges so that they can transfer property with no equity, deal with jointly owned property when only one owner has a tax debt, or if they want to refinance a loan.

When you hire a tax professional, they'll help you understand how to best explore these options during the appeals process so that you can protect your assets and get a resolution that works with your budget and your financial goals. 

How and When to Request a CDP Hearing with the Office of Appeals

If you receive a “Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320,” or IRS Letter 3172, you can request a CDP hearing with the Office of Appeals by completing IRS Form 12153, “Request for a Collection Due Process or Equivalent Hearing.” Alternatively, you can send a written request for a hearing with the same information required on that form. Include a copy of the tax lien notice you received.

You must make your request for a CDP within 30 days after the 5-day business timeframe for the lien filing, or you lose the opportunity. During the appeal, you can explain why the lien should not have been filed (for example, there was an error). If you have not had the chance to do so previously, you can appeal the amount of tax due -- note that you cannot do this with the other appeal options. If you miss the window to request a CDP hearing, you may only be able to appeal the tax liability by paying and requesting a refund, but a tax pro can ask your questions about other options. 

Depending on the requests you make, the CDP hearing could conclude with you setting up a payment arrangement and/or with the IRS agreeing to release, withdraw, discharge, or subordinate the federal tax lien.

Using IRS Form 12153

On Form 12153, you should note the following:

• Basis for hearing -- Filed notice of federal tax lien
• Taxpayer info -- Basic info about your tax liability, tax due, and tax period.
• Reason for requesting the hearing -- Not liable for the tax, spousal defense, taxes discharged in bankruptcy, payments not applied, request a lien withdrawal, financial hardship, collection alternatives, or other. If you select other, you can write in your answer. Although multiple options may apply, you should select the main option.

If you want to make arrangements for your personal or business taxes owed, you can specify that on Form 12153 as well. That includes an installment agreement and an offer in compromise, but you can also let the IRS know if you cannot pay the balance. Finally, you may note that your spouse was solely responsible for the taxes owed, or you can offer other reasons why the lien should be released or withdrawan. If you write a letter, you need to include all of that information as well.

In some cases, you can work out an arrangement with the collection office that sent you the notice, without going through the appeals process. Call the phone number on the IRS letter and explain why you disagree with the tax lien. Note that this phone call does not increase the amount of time you have to make a formal appeal. If an IRS agent or a representative resolves your issue over the phone, you can cancel your request for a hearing. To be on the safe side, you should also submit a written request for an appeal hearing. Remember, you get one hearing related to an NTFL for each taxable period.

What Happens After You Request a CDP Hearing With the Office of Appeals?

Once the IRS Office of Appeals receives your form or letter, the office will contact you to schedule a meeting. The initial conference with appeals takes place over the phone, by correspondence, or face-to-face if you qualify. After the hearing has finished, the Office of Appeals will issue a determination letter. If the appeal goes in your favor, the IRS may grant your request to set up payments or other arrangements, and they may also agree to release, withdraw, subordinate, or discharge a tax lien as requested. However, the Office of Appeals may disagree with you and decide the tax lien should remain filed.

If the IRS Office of Appeals denies your request, you can request a judicial review from the U.S. Tax Court. You have to petition the court within 30 days of the date the Office of Appeals issues the determination letter. However, usually, the exact deadline is specified in the letter. If you fail to respond in time, you cannot go to court even if you do not agree with the decision from the Office of Appeals.

Equivalent Hearing: When You Miss the Deadline for a CDP Hearing

If you fail to request a CDP hearing by the 30-day time frame, after the five-business-day period, you can ask for an “equivalent hearing” using the same form.  Be sure to check the equivalent hearing box, which is line 2 on Form 12153, or alternatively, you can write a letter to appeal. You must request this hearing on or before the end of the 1-year period plus five business days after the filing date of the Notice of Federal Tax Lien. 

An equivalent hearing gives you the same opportunities as a CDP hearing, with a few limitations. Whenever possible, it's best to appeal by the deadline so you get all of the rights associated with a CDP hearing. However, at this point, you can still say that the lien was filed in error and you can make payment requests or ask the IRS to release, withdraw, discharge, or subordinate the tax lien. The main difference with an equivalent hearing and a CDP hearing is that you have no further appeal rights -- if you disagree with the results of an equivalent hearing, you cannot appeal to the Tax Court. Additionally, if there's an active collection action going on (for example, a bank levy or wage garnishment), requesting an equivalent hearing will generally not stop those actions.

How and When to Request a Collection Appeals Program (CAP) Hearing

A taxpayer can utilize the CAP program before or after the IRS files a Notice of Federal Tax Lien. In other words, you can appeal a proposed or actual filing of an NTFL under the Collection Appeals Program (CAP). You may also request a CAP hearing on a denied withdrawal, subordination, or tax lien discharge. Although the CAP process is much faster than utilizing other appeals processes, you cannot go to court if you disagree with the determination. Moreover, you cannot challenge the existence or amount of your taxes owed. Here's how to appeal with a CAP based on whether you're working with a revenue officer or not.

• No Revenue Officer Contact – Just a Letter or Telephone Call -- If you received a letter, call the number on the notice and explain why you do not agree with the tax lien. Offer a solution. If you cannot reach an agreement with the IRS representative, state you want to appeal, and they should get a manager on the phone. Then, follow the rest of the instructions below.
• Revenue Officer Contact -- If you disagree with a revenue officer assigned to your case, you can request a conference with the Collection Manager. Then, follow the rest of the instructions below.

If you disagree with the Collection manager’s decision, you can submit Form 9423, “Collection Appeal Request” to that collection office. You should let the manager know within two days that you want to appeal, and then, you should postmark the form within three days. If the manager never contacts you (typically, they should get ahold of you 24 hours after you make the request), then, you should file Form 9423 within four days, and also note on the form that you requested a manager meeting and didn't get a response.

Who Can Represent Me in an Appeal for a Federal Tax Lien? How to Find Help

When appealing a tax lien through a CDP Hearing or Equivalent Hearing, the following people can represent you:

• Yourself
• Tax Attorney
• Certified Public Accountant
• Enrolled Agent
• Member of Your Immediate Family
• For Business Taxes: Full-Time Employees, General Partners, or Bona Fide Officers
• Low-Income Tax Clinic (If You Qualify)

Although you can represent yourself, your chances of success are a lot higher with an experienced tax professional. The IRS prefers to work with qualified tax professionals. That usually results in a resolution for both parties quickly because tax professionals understand the process better than most individuals. If you are looking to check the status on appeals, you can call 1-855-865-3401 to check the status of an appeal.

How to Find a Tax Pro Using TaxCure

Finding an experienced tax pro can be challenging. Unfortunately, a lot of the big, so-called best tax relief firms run very generic operations with high churn rates -- they want to get clients in and out, and often they cannot customize the best solution for their clients because they offer one-size-fits-all resolution from pros who tend to be inexperienced, overworked, and never directly connect with clients. To get the best resolution for your needs, you should work with a tax pro who can carefully review your situation and customize a solution based on your budget, goals, and future tax plans -- check out tips on finding legitimate help.

The best place to find that kind of help is by doing a search on TaxCure. Using this site, you can narrow down the results based on the problem you're having (for example, federal tax lien), the solution you want (for example, lien subordination, installment agreement, offer in compromise, etc), and if applicable, the tax agencies you're dealing with (for example, the IRS and your state). Get more tips on how to use TaxCure or start your search for high-quality, customized help today. Our algorithm will only show the closest and best-rated professionals who have experience dealing with the problems you have selected.