Tax Brake with Robert G. Nath, Esq.

This new right is important to all taxpayers who owe back taxes. It is especially pertinent to separated or divorced couples who had filed joint returns, where one person owes taxes or where one spouse is left in the IRS' gun sights.

You have the right to challenge the appeals officer's decision in court, but as a recent case makes clear, such challenges have limited chances of success. In Sillavan v. United States (USDC ND Ala 1/14/02), a federal district court ruled for the IRS, upholding its right to levy on the taxpayers IRA. The court said that the taxpayer could contest the underlying tax liability (that is, do you owe, and how much) ONLY if the taxpayer had not been issued a Notice of Deficiency (allowing you to contest the tax in Tax Court). In many cases, that will mean no contest of the liability.

Otherwise, the only thing you can fight at the hearing is the propriety of levying on assets, or if you go to federal court, the appeals officer's decision to allow the levy. In that case, the standard is whether the appeals officer “abused his/her discretion” or made a “clear error.” The standard is NOT whether the court agrees with your views.

You can see that such a standard gives wide leeway to the IRS to levy on assets and little recourse to contest them, even in the Collection Due Process Hearing. Moreover, except in rare cases there is no absolute right to collection alternatives such as installment agreement or offers in compromise. Those procedures are also in the IRS' discretion, so even if you have a good case, it must be more than good for a court to intervene.

The lesson is: don't count on the Collection Due Process Hearing, or a follow-on court challenge, to be successful. It's better to work out your collection problems with the revenue officer or Service Center.

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