The IRS Office of Appeals continues to make errors in classifying hearings and determining the statute of limitation on collections, the Treasury Inspector General for Tax Administration reported (TIGTA Rep’t No. 2012-10-077).
The audit and report, required annually by statute, indicates that, based on statistical samples studied, the potential number of errors has increased in each of the previous four fiscal years. During that period, the number of new appeal cases under collection due process (CDP) and equivalent hearing (EH) provisions has increased 66%, outstripping Appeals’ case closures each year (see related graphic, “CDP Appeals on the Rise,” below).
Taxpayers that receive a notice of federal tax lien or intent to levy may request a CDP hearing. If the IRS receives the request within 30 calendar days plus five business days of the filing of the lien or 30 days of the notice of intent to levy, it suspends collection action while Appeals provides a CDP hearing. If the taxpayer does not timely request a CDP hearing, the IRS may at its discretion grant an equivalent hearing, which is similar to a CDP hearing except that the IRS is not required to suspend collection action and the taxpayer is not entitled to a judicial review.
Of 70 CDP cases for fiscal year 2011 that TIGTA examined, three were incorrectly classified as EH; of 70 EH appeals, one was misclassified as CDP. Extrapolating to the total number of each type of case, TIGTA estimated that as many as 1,772 CDP cases should have been EH, and 150 EH cases should have been CDP. The combined total, 1,922, compares with an estimated potential 947 misclassified cases from the previous year’s audit.
TIGTA also found that, of the 70 CDP cases studied, Appeals staff had overstated the collection statute expiration date (generally 10 years from the date of assessment) in 13 cases and had understated it in three cases. Extrapolating to all CDP cases for the fiscal year, TIGTA estimated that as many as 9,450 taxpayers may have been affected.
Appeals managers agreed with TIGTA recommendations to provide more training and written guidance to hearing officers and undertake other remedies and to correct the errors found.