October 9, 2023 | Tax Relief
IRS Form 9423 and the Collection Appeals Program
When it comes to collecting debts, nobody beats the IRS. One reason the IRS is so good and recovering unpaid taxes is because the agency has powerful tools at its disposal, such as tax liens and levies. Yet the IRS isn’t perfect, and they sometimes get it wrong when trying to collect taxes.
Because the IRS sometimes makes mistakes, there are programs in place to allow taxpayers to explain why the IRS should stop trying to collect a tax debt. One such program is the Collection Appeals Program (CAP), which the tax law firm of Timothy S. Hart Law Group, P.C. can help you take advantage of when fighting the IRS.
An Overview of the IRS Appeals Process
When the IRS tries to collect money from a taxpayer, there’s a complicated and intricate process they have to follow. These procedures include the type and number of notices they have to send the taxpayer, the information they must provide, and the amount of time they must provide the taxpayer to respond or contest what the IRS is trying to do.
After the IRS decides to start collecting a tax debt, there’s often an appeals process in place. Two of the most common are the Collection Due Process (CDP) and the Collection Appeals Program (CAP). To help you decide which option is right for you, this post looks at CAP, it explains when to use CAP, and then, it outlines the differences between these two options.
What Is the Collection Appeals Process?
The Collection Appeals Process is an IRS program that allows taxpayers to appeal certain collection actions. CAP lets taxpayers explain why the IRS should not move forward with the proposed collection action and suggest alternatives.
What Is Form 9423?
This is the form that you use to appeal certain collection actions. Before filing Form 9423, you should request to speak with a manager. If they cannot resolve your issue, you should file this form as soon as possible.
When You Can Use the IRS Collection Appeals Program
CAP is available for disagreements concerning levies, seizures, liens, and installment agreements, but only at certain points during each collection action. For example, the CAP won’t apply if you want to challenge the amount of the tax debt. The following sections provide greater detail as to when the CAP is available.
Federal Tax Liens
You may use CAP to appeal the proposed filing of a Notice of Federal Tax Lien, the actual filing of a Notice of Federal Tax Lien, or the IRS’ denial of a request to withdraw a Notice of Federal Tax Lien. In some situations involving an alter ego or nominee property subject to a tax lien, third parties can utilize the CAP, too.
Federal Tax Levies
CAP is available before or after the IRS levies your property. If your money has already been sent to the IRS (following a wage or bank account levy, for instance) and the IRS refuses to give it back, you can appeal the IRS denial of your request to have your money returned to you.
Seizure of Property by the IRS
An appeal is possible before or after the IRS takes your property. However, once the IRS sells your property, CAP is no longer available. That said, you have the right to buy back certain property if you act quickly and pay interest to the buyer, but ideally, you should always appeal or make payment arrangements before the IRS takes your assets.
Decisions About Installment Agreements
If you request an installment agreement from the IRS but your request gets rejected, an appeal through the CAP is possible. You can also use the CAP process if the IRS proposes or carries out an installment agreement modification or termination.
Situations Where You Can’t Use IRS Collection Appeals Program
Even though the CAP is available in more situations than the CDP, it still has some limitations as to where it can be used. For example, CAP can’t be used to appeal most IRS decisions or actions concerning:
- Jeopardy levies
- Offers in compromise
- Trust fund recovery penalties
- Penalty appeals
- Audit reconsiderations
- Tax abatement requests or refund claims
- Property that’s under court control
- The amount or existence of the tax liability — This would be normally handled by CDP.
- The release of a tax lien — Note a lien release is not the same as a lien withdrawal.
Assuming you conclude that the CAP is available for your tax issues and you want to move forward with it, you’ll need to complete IRS Form 9423.
IRS Collection Appeal Request Form 9423
Before filling out and filing Form 9423, you may need to try a few things first. The exact steps (and timing) depend on exactly what you are disputing, but these steps can be found in IRS Publication 1660.
For the most part, these initial steps involve talking to the IRS employee or officer handling the tax collection matter. If this doesn’t work, you should request to talk to a collection manager. If the manager doesn’t respond to your request within a certain time frame or if you cannot come to a satisfactory conclusion with them, you can complete Form 9423 to appeal.
Filling Out IRS Form 9423
When it comes to IRS forms, 9423 is one of the simpler ones. Basically, all you’ll provide is your basic information (name, address, etc.), what’s being appealed, and the reason you’re disagreeing with the IRS.
One thing to note about this form is that there isn’t much space provided for your explanation as to why you believe the IRS is wrong. So it’s a good idea to provide your explanation on a separate sheet of paper. Having this additional sheet shouldn’t be an issue as you’ll most likely be providing supporting documents with Form 9423.
To ensure your argument is as strong as possible, you may want to work with a tax attorney. They understand how to leverage tax laws in your favor. They can also help you select an alternative to the suggested appeal — for example, if the IRS is proposing a levy, you may want to counter by offering to set up a monthly payment plan.
What Happens After Filing the 9423 Form
Besides appealing an IRS collection action or decision, one of the benefits of filing Form 9423 is that it temporarily stops the IRS from trying to collect money from you. This hold is in place until your appeal is resolved or the IRS believes you will do something to prevent the IRS from getting money or property from you, like trying to withdraw money from a bank account and hide it.
There will be an Appeals conference or hearing where you (or your representative, like an attorney, CPA, or enrolled agent) get to present your case to the Appeals officer. These conferences are usually completed over the telephone.
After there’s a decision, it is binding on you and the IRS. If you disagree with the decision, you cannot go to court to have it reviewed by a judge. While the CAP decision isn’t appealable to a court, it may sometimes be possible to have an administrative or judicial review of specific issues raised during the Appeals conference.
Collection Due Process Vs. Collection Appeals Program
CDP allows the taxpayer to request a hearing so they can have the IRS Office of Appeals review a collection action. Generally speaking, CDP is available to the taxpayer if the IRS sends them any of the following:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing
- Final Notice—Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund—Notice of Your Right to a Hearing
- Notice of Levy and of Your Right to a Hearing
The CAP is usually an option for taxpayers in similar circumstances. The CAP will usually be available if the IRS:
- Files (or proposes to file) a Notice of Federal Tax Lien
- Places a levy on the taxpayer’s property
- Seizes property belonging to the taxpayer
- Rejects, modifies, or terminates an installment agreement
Should You Appeal With CAP or CDP?
The biggest thing to consider before going through with the CAP process is deciding if there’s another appeals process you should use instead, such as CDP. If you’re considering CAP, there’s a chance that you can also consider CDP. Why should you use one over the other? Here are some advantages of CDP over CAP:
- You can use CDP to challenge the existence or amount of a tax debt.
- If you don’t like the decision from CDP, you can appeal it to the U.S. Tax Court.
CAP has some benefits over CDP, such as:
- The CAP process is faster than CDP in most cases.
- If the CAP results in a favorable decision for you, the IRS usually can’t further contest it in court.
- You can use the CAP to appeal more decisions than with CDP, such as disagreements about installment agreements.
Get Help with IRS CAP Appeals
As a taxpayer, you have special rights when the IRS tries to collect money from you. The Timothy S. Hart Law Group, P.C. works hard to protect those rights. Depending on your situation, taking advantage of the Collection Appeals Program can make all the difference when dealing with back taxes. Contact us to find out more.