Collection Appeals (CAP)

The Collection Appeals Program (or CAP) was adopted by the IRS in April 1996 and was expanded in January 1997.   It is an alternative to the new Collection Due Process program.

 The CAP program gives taxpayers the right to appeal a variety of collection actions, including liens, levies, seizures, and the threatened termination of installment agreements. CAP does NOT cover every kind of tax controversy with the Collection Division. For example, it does not cover the Trust Fund Recovery Penalty, penalty abatements and appeals of denials thereof, or offers in compromise.

CAP enables the taxpayer to appeal liens, levies and seizures either prior to or after the collection action has taken place.  Collection usually suspends enforcement action during the appeal process.  The effect of this appeal is typically a five-business day delay of collection. The current policy in Appeals is that they must make every effort to close all collection appeals within five business days of the date of the taxpayer’s filing of a Form 9423, Collection Appeal Request.

Collection appeals are appropriate after the taxpayer or the representative has first discussed the problem with the collection manager of the office in which the individual revenue officer is employed. This should only be done after the matter has been discussed with the Revenue Officer who is assigned the case. 

When the matter cannot be resolved with the Revenue Officer, the taxpayer (or representative) should request a meeting with the collection manager. The taxpayer should be prepared to present arguments in favor of a less harsh form of collection action as well as an alternative plan for resolving the matter.  Hopefully, the Collection Manager will agree to the alternative plan if it is reasonable and will provide for satisfaction of the liability.

If the Service’s Automated Collection Service (ACS) is handling the tax liability, the taxpayer or representative should request to speak with an ACS manager.

If resolution of the matter is NOT achieved, then the taxpayer must make a written request for an appeal on a Form 9423, if his/her case is in the field.  If the case is at ACS, an oral request for an appeal is usually sufficient. This request must be received by the revenue officer within two business days after the meeting with the collection manager, or received by ACS within two business days after the telephone conference with the ACS manager. Failure to timely make this request will result in the resumption of collection action.

Collection or ACS must send the case to Appeals within two days of the latter of the manager’s rejection of the taxpayer’s proposal, or the manager’s receipt of the Form 9423. As Appeals is required to close these matters within five business days, the manual suggests that Appeals hold a conference with the taxpayer or representative within two days of receipt of the case. Given the short time limits, conferences will most likely be conducted by telephone.

Appeals Office Options
The manual provides a very sketchy and unclear discussion of the standard of review to be employed by Appeals, so it is presently unclear what will be the outcome of most of these cases. Internal Revenue Manual Section 8719.7 states that appeals should review the case for appropriateness based on law, regulations, policy, and procedures, considering all the facts and circumstances. Appeals is further directed that Collection’s judgment should not be reversed just because of a difference of opinion concerning the choice of one of several possible correct actions taken on the case. For reversal, Collection’s actions must be inappropriate given all of the facts and circumstances. IRM  Section 8719.7.

Interestingly, however, IRM Section 8719.7 also states that Appeals may decide that some alternative collection method or slight alteration might be more appropriate under the circumstances. Therefore, appeals or settlement officers should exercise discretion, as the manual specifically recognizes that most of these cases will involve judgment calls.

So will Appeals review for appropriateness, inappropriateness, or more appropriateness? Most likely, a little of all of the above. Thus, practitioners should be prepared to explain to Appeals the reasons why the collection action was inappropriate, why some other action is more appropriate, and provide Appeals with a plan to resolve the matter. The appeals or settlement officer should orally inform both Collection and the taxpayer/representative of his/her decision within the five day time frame.

The appeals/settlement officer must then follow up with a written closing letter no later than three business days after this decision is orally rendered. The appeals officer must also write an appeals case memorandum (ACM) specifying complete instructions on what decisions were made and any action that will need to be completed by Collection, i.e. an installment payment agreement. The memorandum is unnecessary if the closing letter contains the specific information required in the appeals case memorandum.

Another suggestion for practitioners; write the closing letter and/or the appeals memorandum for the appeals officer. This can be done with either an attachment to the Form 9423, or in a separate letter to the appeals officer assigned to the case detailing the reasons why the collection action was inappropriate, a discussion of what collection action is more appropriate, and an alternative plan to address the taxpayer’s liability.

Lastly, make sure that your client understands that when an agreement is proposed to Appeals, he/she must be ready, willing, and able to timely perform all actions required under the agreement. Default renders the agreement null and void, and Collections is released from its terms. Additionally, any material misrepresentation of fact or failure to fully disclose information by the taxpayer will render the agreement null and void. Before a collection officer declares an agreement void, he/she must first confer with Appeals.

In conclusion, remember that the goal of every revenue officer is to close his/her file. A revenue officer usually only resorts to seizure or levy when he/she has been ignored by the taxpayer. A levy or seizure usually serves to get the taxpayer’s attention. Once obtained, a revenue officer will very often voluntarily release a levy, or reverse seizure action, if the taxpayer agrees to address his/her tax liability.

As for liens, Appeals can direct that a lien not be filed, direct that a lien be discharged, or direct that the Service subordinate or provide a certificate of non-attachment. However, all of the above can be obtained by the taxpayer by simply making a request to the revenue officer or the Area Director’s office. CAP does nothing to expand the very limited circumstances in which a lien can be released. This remains strictly governed by statute, and only available in very specific circumstances.