Dealing with unpaid taxes and the IRS bureaucracy can be challenging. Sometimes the key is to get in front of the right person at the IRS. But the IRS often refuses in-person meetings. The Roberts v. Commissioner, T.C. Memo. 2019-117, case provides an example of this. It involves the taxpayers request for an in-person collection due process hearing.
Facts & Procedural History
The taxpayers had an unpaid tax debt. The IRS eventually issued a notice of intent to levy, which afforded the taxpayers to request a collection due process hearing (CDP hearing).
The IRS eventually issued a notice of intent to levy, which afforded the taxpayers to request a collection due process hearing (CDP hearing).
The taxpayers requested a face-to-face CDP hearing in Houston, Texas.
The IRS assigned the CDP hearing to a settlement officer located somewhere other than Houston, Texas.
The taxpayer, through their tax attorney, made several requests for a face-to-face CDP hearing. The IRS refused the requests and eventually issued a notice closing the CDP hearing.
About the CDP Hearing
The CDP hearing is intended to provide an independent verification of the facts and circumstances before the IRS proceeds with enforced collection actions. This process was created in response to perceived abuses by the IRS in the 1990s. The hope is that the IRS would resolve tax debts amicably through this process.
While the intent may be good, in practice, critics question whether CDP hearings provide much of a remedy. The CDP hearing is often not held for several months, assuming the IRS does not process the hearing request and fails to ever hold the hearing. Worse yet, many settlement officers treat CDP hearings as a “rubber stamp” type of proceeding. They don’t consider the circumstances or try to resolve cases. They merely document that the IRS mailed notices, etc. and then issue a determination that the IRS can proceed with collections.
Given these practices, often, the CDP hearing only provides a reprieve in terms of time for collections and, in some cases, affords the taxpayer the ability to appeal the IRS’s collection action directly to the U.S. Tax Court. While these benefits have value, they aren’t necessarily the benefits intended by Congress. They don’t resolve the underlying tax debt.
Why An In-Person Meeting is Important
With that background, we can consider the Roberts case. The taxpayers in Roberts requested an in-person CDP hearing in Houston. The tax attorney representing the taxpayers made this request by stating that he had a good rapport with the IRS settlement officers in Houston.
It isn’t stated in the case, but what the tax attorney was telling the IRS by making this request is that he was trying to avoid a rubber-stamp-type of hearing. It can be much harder for the IRS to say “no” in person. This is particularly true if the taxpayer’s circumstances are unique and collections would be unjust.
The IRS’s Practice of Denying In-Person Meetings
The IRS refused the tax attorney’s requests for an in-person meeting.
This has been a longstanding problem with CDP hearings. It is prompted by budgetary constraints and the IRS’s desire to have lower-level (and lower paid) employees at the IRS Service Centers handle more cases.
But can the IRS legally deny a reasonable request for an in-person meeting? The CDP hearing is a right afforded by Congress.
The taxpayers cited the regulations, which the court summarized as follows:
A taxpayer may request a face-to-face CDP hearing at the Appeals Office closest to the taxpayer’s residence. See sec. 301.6330-1(d)(2), Q&A-D7, Proced. & Admin. Regs. However, “[a] face-to-face CDP conference concerning a collection alternative, such as an installment agreement or an offer to compromise liability, will not be granted unless other taxpayers would be eligible for the alternative in similar circumstances.” See id. Q&A-D8. For example, if a taxpayer is not in compliance with his filing obligations or did not make certain required deposits of tax as set forth in Form 656, no face-to-face conference will be granted to the taxpayer if he wishes to make an offer-in-compromise.
The taxpayers argued that the IRS’s policy manual is inconsistent with the above-listed rules from the regulations.
Justice Denied: No In-Person Meeting
With next to no explanation, the U.S. Tax Court concluded that the IRS was entitled to follow the IRS’s policy manual. The court sustained the IRS’s determination.
This holding is not unexpected. It is unfortunate, however.
Taxpayers deserve more when it comes to dealing with the IRS for unpaid taxes. The IRS process can make it very difficult to come into compliance. The CDP hearing provides an opportunity to help taxpayers come into compliance. It should be used to resolve tax debts. Simply ensuring that IRS notices were timely isn’t good enough.
An in-person hearing goes a long way in making the process more effective. And the request isn’t that costly for the IRS. The IRS already houses settlement officers in most major cities.
Having in-person meetings would not only help taxpayers, it would also help the IRS. It is better for the IRS to secure some payments sooner, such as through installment agreements negotiated during the CDP hearing, than to close CDP hearing back to the IRS collection function and wait for the IRS collection function to work the case. This add months, if not years, to the time the IRS collects any money. This is a lost opportunity for the IRS.