Collection Due Process (CDP) Hearings — Complete Practitioner Guide

What Is a Collection Due Process Hearing?

The Collection Due Process (CDP) hearing is one of the most powerful taxpayer rights in the IRS collection process. Established by the IRS Restructuring and Reform Act of 1998 and codified at IRC §6320 (lien) and IRC §6330 (levy), CDP hearings give taxpayers the right to an independent review of IRS collection actions before they become final.

CDP hearings are triggered by two types of IRS notices: (1) a Notice of Federal Tax Lien Filing and Your Right to a Hearing (Letter 3172) — sent after the IRS files a Notice of Federal Tax Lien; and (2) a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058 or LT11) — sent at least 30 days before the IRS levies. The taxpayer must request a CDP hearing within 30 days of the notice date.

CDP vs. Equivalent Hearing — Key Differences

If the taxpayer misses the 30-day CDP deadline, they can still request an Equivalent Hearing within 1 year of the notice date. However, Equivalent Hearings have significantly fewer protections than CDP hearings.

The most critical difference is the automatic levy stay — a timely CDP request stops the levy automatically, without any action by the IRS. This makes the CDP hearing request an emergency tool for practitioners whose clients are facing imminent levy action.

What Can Be Raised at a CDP Hearing

At a CDP hearing, the taxpayer can raise the following issues: (1) Collection alternatives — the taxpayer can propose an installment agreement, OIC, CNC status, or other alternative to the proposed collection action; (2) Appropriateness of the collection action — the taxpayer can argue that the levy or lien is inappropriate given the circumstances; (3) Spousal defenses — the taxpayer can raise innocent spouse relief under IRC §6015; and (4) Liability challenges — if the taxpayer did not previously have an opportunity to dispute the underlying liability, they can challenge it at the CDP hearing.

Liability challenges: The ability to challenge the underlying liability at a CDP hearing is a powerful tool for taxpayers who received a Substitute for Return (SFR) assessment without proper notice. If the IRS prepared an SFR and the taxpayer never received the Notice of Deficiency, the taxpayer may be able to challenge the liability at the CDP hearing — even years after the assessment.

Preparing for the CDP conference: The CDP conference is conducted by an IRS Appeals Officer. Practitioners should prepare a comprehensive submission that: (1) proposes a specific collection alternative with supporting financial documentation; (2) addresses any liability issues; (3) argues why the proposed collection action is inappropriate; and (4) demonstrates the taxpayer's compliance with current filing and payment obligations.

Case Study: CDP Hearing Stops Retirement Account Levy

Client profile: Barbara N., age 58, self-employed consultant. She owed $92,000 in back taxes for 2019-2022. The IRS sent a Final Notice of Intent to Levy (LT11) targeting her IRA account, which had a balance of $185,000. Barbara received the notice on a Monday and called the practitioner on Tuesday.

Emergency response: The practitioner filed Form 12153 requesting a CDP hearing on Wednesday — 2 days after the notice date, well within the 30-day deadline. The CDP request automatically stayed the levy. The IRS could not levy the IRA while the CDP was pending.

CDP strategy: The practitioner submitted a comprehensive CDP package proposing an installment agreement of $1,200/month (Barbara's full MDI based on Form 433-F). The package also argued that levying the IRA was inappropriate because: (1) the IRA funds were Barbara's only retirement savings; (2) levying the IRA would create a taxable distribution of $185,000, generating approximately $55,000 in new tax liability; and (3) the installment agreement would fully pay the $92,000 liability within 77 months, before the collection statute expired.

Result: The Appeals Officer accepted the installment agreement and declined to approve the IRA levy. The CDP case was resolved without any levy action. Barbara's retirement savings were preserved.

Frequently Asked Questions