Due Process in IRS Collection Actions

The Internal Revenue Service is now required to give taxpayers whose property might be levied upon pre-notification of the levy and an opportunity for a formal hearing and judicial review.

The notice must be in writing. It may be given in person, left at the taxpayer’s dwelling or usual place or business, or sent by certified or registered mail not less than 30 days before the day of the first levy. In addition, the notice must include information such as the amount of unpaid tax, the right to request a hearing during the 30-day period, the relevant Internal Revenue Code provisions, the administrative procedures relating to appeals, and alternatives available to avoid the levy.

The taxpayer is entitled to one hearing per tax period before an uninvolved Appeals officer. At the hearing, the IRS must verify that all legal and administrative requirements of the proposed collection action have been met. The taxpayer may raise any relevant issues at the hearing, including challenges to the underlying liability, appropriate spousal defenses, challenges to the appropriateness of collection actions, or collection alternatives.

The taxpayer may not raise any issue that was considered at a previous hearing or in any other administrative or judicial proceeding. He or she has the right to appeal any determination of the appeals officer in the Tax Court or a U.S. District Court within 30 days of the determination. During that 30-day period or while the appeal is pending, the IRS is not permitted to take any levy action.

Once the IRS has filed a Notice of Federal Tax Lien (NFTL), it is required to inform the taxpayer in writing that the NFTL has been filed. The notice must be given no more than five days after the NFTL has been filed and must once again contain the amount of the unpaid liability and the administrative appeals available to the taxpayer.