Collection due process for payers: the hearing before a levy and after a lien

What a CDP hearing is

Collection due process was created by the IRS Restructuring and Reform Act of 1998. The manual describes its purpose this way: the provisions “give taxpayers an opportunity for an independent review to ensure that the levy action that has been proposed or the NFTL that has been filed is warranted and appropriate” (IRM 5.1.9.3.1, 10-19-2023). The hearing is held by Appeals, which is separate from the Collection office that issued the notice.

In deciding the case, Appeals must verify that the law and administrative procedure were followed, consider the issues raised, and consider “whether the action taken or proposed balances the government’s need for the efficient collection of taxes with the taxpayer’s legitimate concern that any collection action be no more intrusive than necessary” (IRM 8.22.4, 09-24-2025). There is a second route, the Collection Appeals Program (CAP), which is faster and covers more actions, but Publication 1660 notes that under CAP you may not challenge the liability and “cannot proceed to court if you don’t agree with Appeals’ decision”.

The levy notice: Letter 1058 and LT11

Under IRC 6330, the IRS must give notice of the right to a hearing at least 30 days before the first levy for a tax period. The manual refers to Letter 1058 as the version issued in the field; the IRS FAQ treats Letter 1058 and LT11 alike, giving 30 days to request a hearing after either (IRS CDP FAQs). A CP504 comes earlier and is not this notice: “The IRS cannot levy with just this notice”, the FAQ says, because it must first issue the formal notice of intent to levy.

The deadline: “IRC 6330 gives taxpayers the right to request a hearing during the 30-day period that begins the day after the date of the Notice of Intent to Levy and Notice of Your Right to a Hearing” (IRM 5.1.9.3.1). For a partnership’s employment tax, the letter goes to the partnership when partnership assets are to be levied, and to the general partners if the IRS intends to levy their own property.

There are four exceptions where the IRS can levy first and offer the hearing afterward: jeopardy, a levy on a state tax refund, a disqualified employment tax levy, and a federal contractor levy (Publication 1660). The disqualified employment tax levy is explained below. Levies served on a business’s customers are covered in Form 668-A and 668-W vendor levies.

The lien notice: Letter 3172

Under IRC 6320, the IRS must notify you after the first Notice of Federal Tax Lien filed for a tax and period. Letter 3172 is delivered or mailed “not more than five business days after the day of the filing of the NFTL”. The hearing window is counted differently from the levy window: the request is due “within the 30-day period that commences the day after the end of the five-business-day period following the filing of the NFTL” (IRM 5.1.9.3.2.1, 08-28-2025). Because the IRS does not know the exact recording date in advance, it estimates it and prints a “must file by” date on the letter. Use that date.

If you get both a lien notice and a levy notice, you can request a hearing on both, and Appeals consolidates them. What the lien means for your bank and vendors is in Federal tax lien on a business balance.

Requesting the hearing on Form 12153

The request must be in writing. Taxpayers “generally use Form 12153, Request for Collection Due Process or Equivalent Hearing, to request the hearing”, which comes with the notice, but any signed written request works if it contains the required items (IRM 5.1.9.3.2): the taxpayer’s name, address, phone and TIN (for a business, the EIN); the type of tax and tax periods; a statement that you request a hearing on the levy or lien; the reasons you disagree; and the signature of the taxpayer or an authorized representative. For a business, Publication 1660 says you may be represented by “regular full-time employees, general partners or bona fide officers”, as well as attorneys, CPAs and enrolled agents with a Form 2848.

Send it to the address on the notice. If it is mailed timely to an address on the notice, the postmark counts; if it goes to an address not on the notice, timeliness is judged by when it arrives at the right office. Fax and, through the revenue officer, the Document Upload Tool are possible. Keep proof of the date.

What a timely request does

Form 12153 explains it: “Your timely request for a CDP hearing will prohibit levy action in most cases.” It also suspends the 10-year collection period until the Appeals determination is final, and that time is added back to the period. It does not stop a lien: “Your request for a CDP levy hearing, whether timely or equivalent, does not prohibit the IRS from filing a notice of federal tax lien” (Form 12153, Rev. 7-2022). The revenue officer can keep working with you while the case is at Appeals; if you reach a payment plan, you can withdraw the request on Form 12256.

Missed the 30 days: the equivalent hearing

A late request can be heard as an equivalent hearing, but only if you ask for one: check the Equivalent Hearing box (item 2 on the July 2022 form) or say so in writing. The deadline is one year from the date of the levy notice, or one year plus five business days from the lien filing. The hearing follows the same procedures, but the manual is clear about the difference: Appeals issues a decision letter, not a Notice of Determination, “and the taxpayer is not entitled to judicial review. CSED’s are not suspended during an EH” (IRM 5.1.9.3.2.2). Levy is not prohibited during an equivalent hearing.

What you can raise

Publication 1660 lists the issues most often raised:

• Collection alternatives such as an installment agreement or offer in compromise. To have one considered, send financial information: the IRS FAQ points businesses to Form 433-B. See Installment agreements for business tax balances.
• Subordination or discharge of the lien, and withdrawal of the Notice of Federal Tax Lien.
• The existence or amount of the tax, “but only if you did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability.”
• That collection is causing or will cause economic or other hardship.
• Whether the IRS followed the law and its procedures, which Appeals must verify in every case.

Two limits apply. You “may not raise an issue that was raised and considered at a prior administrative or judicial hearing, if you, or your representative, participated meaningfully in the prior hearing or proceeding” (Publication 1660). And requests based only on positions the IRS has listed as frivolous, or made to delay, can be denied.

Disputing the amount: the prior opportunity rule

IRC 6330(c)(2)(B) lets you challenge the underlying liability only if you did not receive a statutory notice of deficiency and did not otherwise have a prior opportunity to dispute it (IRM 8.22.8.3, 09-03-2025). Employment tax balances and penalties often do not involve a deficiency notice, so the second test is the one that matters.

The manual sets the standard for when an earlier letter counts: “The correspondence (notice, letter, etc.) must clearly and affirmatively indicate that this correspondence is the taxpayer’s opportunity to have a dispute heard by the Independent Office of Appeals. Letters and notices merely mentioning the word ‘appeal’ may not rise to this level.” Its list of letters that do offer Appeals includes Letter 950 for a proposed employment tax assessment, Letter 105-C (claim disallowed), and Letter 1153 for a proposed trust fund recovery penalty. For the TFRP, the manual notes that the preclusive event “is the taxpayer’s receipt of Letter 1153”, not signing Form 2751.

The list of things that are not a prior opportunity matters to payers just as much. It includes a math error notice, the chance to pay and claim a refund, and “Letter CP15 and CP215, Civil Penalty Notice” (see CP15). If the IRS cannot consider the liability in CDP, its FAQ names three other routes: pay and file a refund claim, request audit reconsideration with new information, or file a doubt as to liability offer.

If you already appealed a 972CG penalty

Many payers reach CDP after a long penalty dispute: a Notice 972CG response, a Letter 854C denial, and an Appeals conference. The manual does not name Notice 972CG or Letter 854C in its lists, so apply the two rules above:

• If Appeals actually heard and considered your reasonable cause argument and you participated, the issue is precluded under IRC 6330(c)(4). IRM 8.22.8.4 says an issue is precluded if it was “Raised and considered in a previous Appeals hearing or judicial proceeding” and the taxpayer participated meaningfully.
• If you were offered Appeals and did not go, whether that counts as a prior opportunity depends on whether the letter “clearly and affirmatively” offered an Appeals hearing. Keep the letter; Appeals will look at its wording.
• If the only notice was the civil penalty bill, the manual’s example says CP15 is not a prior opportunity, so the amount can be raised.

Even where the liability is precluded, collection alternatives, lien relief and hardship remain open. Background: 972CG penalty in IRS Appeals and After the denial: 854C, reconsideration and appeal.

Repeat payroll balances: the disqualified employment tax levy

An employer that has used CDP before on payroll tax may lose the pre-levy hearing. A disqualified employment tax levy is a levy to collect employment tax from a taxpayer who previously requested a CDP levy hearing, where “The prior CDP hearing involved unpaid employment taxes that arose in the two-year period before the period for which the levy is served” (IRM 5.1.9.3.14, 08-28-2025). The hearing is then offered after the levy. The manual says this is discretionary, and that a withdrawn request still counts as a prior request, while an equivalent hearing request does not.

Tax Court review

After a timely CDP hearing, Appeals issues a Notice of Determination. “After Appeals makes its determination in a CDP hearing, the taxpayer may, within 30 days of the date of the determination letter, petition the Tax Court” (IRM 5.1.9.3.10). Publication 1660 warns that you may not be able to raise issues in court that you did not raise at the hearing, so put every issue and all evidence before Appeals. Appeals also keeps jurisdiction over its determination: if Collection does not carry it out, or your circumstances change, you can return to Appeals after first trying to work it out with Collection. If the process itself is failing, the Taxpayer Advocate Service is another route.

Questions people ask