What You Can Raise at a CDP Lien Hearing

Most people who request a Collection Due Process hearing on a lien filing write one sentence on Form 12153: "The lien is hurting my credit." Then they wait for Appeals to fix it. That is not how this works.

A CDP hearing is the one place where an independent IRS office must examine whether the lien filing was proper and whether something less intrusive would do the job. But Appeals answers the questions you put in front of it, and the Tax Court generally reviews only the issues you raised. So the real work is choosing the right issues and supporting them.

The statutory framework

IRC 6320(c) applies most of section 6330's hearing rules to lien hearings. Section 6330(c) then sets the agenda in three parts: what Appeals must verify, what you may raise, and what Appeals must weigh in deciding. Treasury Regulation 301.6320-1(e) restates these for liens.

Under Q&A-E1 of that regulation, Appeals considers:

1. Whether the IRS met the requirements of any applicable law or administrative procedure.
2. Any issues you appropriately raise relating to the unpaid tax.
3. Any appropriate spousal defenses.
4. Any challenges to the appropriateness of the lien filing.
5. Any offers of collection alternatives.
6. Whether the continued existence of the filed notice balances the need for efficient collection against your legitimate concern that collection be no more intrusive than necessary.

Let's take them one at a time.

Issue 1: did the IRS follow the rules?

Section 6330(c)(1) requires the Appeals officer to "obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met." The regulation says Appeals must obtain that verification before issuing a determination. You do not have to raise it for Appeals to check, but you should point Appeals to specific problems.

What can go wrong? The assessment may not have been properly made. Notice and demand may not have been sent. The notice may have been filed for a period that was already paid, or after the collection statute expired. The notice may not have been mailed within five business days. Internal procedures, such as the managerial approval that IRM 5.12.2.5 requires in certain cases, may not have been followed. Treasury Regulation 301.6323(j)-1 gives, as an example of a premature or improper filing, a notice filed without the managerial approval the manual required.

Issue 2: challenges to the appropriateness of the filing

This is broader than "the IRS broke a rule." You can argue that, on your facts, filing the notice was the wrong call. The Internal Revenue Manual is your best evidence of what the IRS itself considers appropriate. For example, IRM 5.12.2.4.3 lets revenue officers defer filing when documentation shows the notice would hamper collection, such as when a viable business depends on receivables financing that the notice would cut off. If those facts existed and the IRS filed anyway, say so, with documents.

The guide to when the IRS files a Notice of Federal Tax Lien walks through the manual's filing, do-not-file and deferral criteria.

Issue 3: collection alternatives

Q&A-E6 lists the collection alternatives available at a lien hearing: a proposal to withdraw the notice where withdrawal will facilitate collection, subordination of the notice, discharge of specific property, an installment agreement, an offer in compromise, posting a bond, or substituting other assets. The regulation adds a limit: an alternative is not available unless it would be available to other taxpayers in similar circumstances.

This is where most lien hearings are won or lost. Appeals is not going to withdraw a notice because it is embarrassing. It may withdraw one where you show, with numbers, that withdrawal will result in the IRS collecting more. Section 6323(j)(1)(C) makes "facilitate collection" a statutory ground for withdrawal, and IRM 5.12.9.3.3 defines it as withdrawal that results, now or later, in a greater amount being collected than if the notice stayed. If you are proposing an installment agreement, remember that section 6323(j)(1)(B) separately authorizes withdrawal for taxpayers in an installment agreement unless the agreement provides otherwise. See the four grounds for lien withdrawal.

Come prepared. Under IRM 8.22.5, when a taxpayer proposes a collection alternative, Appeals uses Letter 3846 to request the required financial information and to address any unresolved compliance issues, such as unfiled returns. An alternative you cannot support is not an alternative.

Issue 4: spousal defenses

If the liability comes from a joint return, you can raise innocent spouse relief under section 6015 or relief under section 66 at the hearing, in writing, under the rules for those sections. Under Q&A-E3, the limits on challenging the underlying liability do not apply to spousal defenses. Under Q&A-E4 and E5, you cannot re-raise a spousal defense that the IRS already decided in a final determination letter or notice of deficiency, or that a court already decided.

Issue 5: the underlying liability, sometimes

Section 6330(c)(2)(B) lets you challenge the existence or amount of the tax only if you did not receive a statutory notice of deficiency for it or did not otherwise have an opportunity to dispute it. The regulation sharpens that:

• Receiving a notice of deficiency means receiving it in time to petition the Tax Court. (Q&A-E2)
• A prior opportunity for an Appeals conference counts as a prior opportunity to dispute, with an exception for pre-assessment Appeals conferences on taxes subject to deficiency procedures. (Q&A-E2)
• If you previously got a levy CDP notice under section 6330 for the same tax and period and did not request a hearing, you had a prior opportunity. (Q&A-E7)

Liabilities that commonly qualify include tax reported on your own return that you now believe was wrong, and assessments where the deficiency notice went to an old address and you never received it in time.

Issue 6: the balancing test

Section 6330(c)(3)(C) requires the determination to consider whether the collection action "balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." For liens, the regulation frames it as whether the continued existence of the filed notice strikes that balance.

This is the place for facts about how the notice is affecting you: a financing arrangement it is blocking, a professional license in jeopardy, a business that cannot buy inventory. Tie each fact to collection. "The notice prevents me from refinancing at a rate that would let me pay the IRS $X more per month" is a balancing argument. "The notice is unfair" is not.

What you cannot raise

Section 6330(c)(4) bars issues that were raised and considered at a previous CDP hearing or other administrative or judicial proceeding in which you meaningfully participated, issues that are frivolous under section 6702, and issues finally decided in a partnership proceeding. Section 6330(g) lets the IRS disregard frivolous portions of a hearing request entirely.

Building the record

Under Q&A-F3, the Tax Court can only consider an issue that was properly raised at the hearing. An issue is not properly raised if you did not ask Appeals to consider it, or if you asked but presented no evidence after being given a reasonable opportunity. Q&A-F4 says the record is the case file: your request, your written submissions, the Appeals officer's notes and memoranda, and the documents relied on.

Translation: write it down, send it in, and keep copies. A phone call that is not memorialized may not exist for purposes of review.

After the determination

Appeals issues a Notice of Determination. Section 6330(d)(1) allows a petition to the Tax Court within 30 days of the determination. In Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022), the Supreme Court held that this 30-day limit is nonjurisdictional and subject to equitable tolling. Do not plan around that. Equitable tolling is an argument you make when something went wrong, not a strategy. File on time.

Appeals answers the questions you ask. Ask good ones, and bring the documents.