Federal Tax Lien and CDP rights

Posted on by katemley

IRC 6320 


Crawford v. Comm’r filed January 7, 2026 by the U.S. Tax Court at T.C. Memo 2026-3 illustrates the opportunity provided to seek Collection Due Process hearing rights after a Notice of Federal Tax Lien has been issued.  In this case, the taxpayer had been assessed a Trust Fund Recovery Penalty for non-payment of employment taxes. Ultimately, the IRS issued Letter 3172 Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.  In this case, the taxpayer’s representative filed a Request for Collection Due Process hearing within the 30 day timeline provided in the Lien notice.  By preserving these rights, the taxpayer obtained the ability to review collection alternatives with IRS Appeals. These would include Currently Not Collectible, regular Installment Agreement, Partial Payment Installment Agreement, or an Offer In Compromise. Many times reviewing collection alternatives with IRS Appeals is more advantageous than with IRS collections.  Most commonly, taxpayers will receive CDP rights at the time a Final Notice of Intent to Levy is issued. Once 30 days passes from the issuance of the Final Notice of Intent to Levy, the taxpayer misses the opportunity to have a CDP hearing. However, it has been this practitioner’s experience that the IRS could issue the Notice of Federal Tax Lien Filing either before or after the Final Notice of Intent to Levy. Therefore, there could be another opportunity for a CDP hearing if the hearing opportunity has been missed because a Final Notice of Intent to Levy has been issued at some point in the past.  Or this opportunity could present itself before the taxpayer is issued a Final Notice of Intent to Levy. In the instant case, the taxpayer was attempting to use the CDP hearing to attack the validity of the Trust Fund Recovery Penalty assessment itself.  Fundamentally, a taxpayer must file an Appeal of the Letter 1153 proposed assessment of Trust Fund Recovery Penalty at the time of issuance of that proposal, rather than appealing the assessment after the fact in a CDP hearing.  Regardless, the IRS could entertain collection alternatives in this setting. 

Appeal Rights and Trust Fund Recovery Penalty

Posted on by katemley

Letter 1153

The United States Tax Court in Mohammad A. Kazmi v. Comm’r of Internal Revenue, T.C. Memo 2022-13 filed March 1, 2022, ruled in favor of the IRS that a properly served and received Letter 1153 constitutes a prior opportunity to challenge the underlying liability and therefore a failure to appeal it prohibits the same challenge at a Collection Due Process hearing (CDP hearing). The taxpayer was issued a Letter 1153, Proposed Trust Fund Recovery Penalty, after interview by a Revenue Officer in his capacity as part-time hourly bookkeeper for his employer who had failed to pay over employment taxes.  A taxpayer has 60 days to challenge a Letter 1153 by submitting a written appeal.  Taxpayer did not make any effort to appeal and as such the IRS assessed him with the penalty.  After issuance of a Notice of Federal Tax Lien, taxpayer filed a timely CDP request and attempted to argue that he should not be held liable for the trust fund recovery penalty.  The settlement officer determined the taxpayer was prohibited from challenging the underlying liability in the CDP hearing.  Taxpayer argued that a Letter 1153 does not constitute a prior opportunity to address the liability because there is no ability to seek judicial review before the Tax Court if appeals would deny the requested relief. The Court agreed that it is correct there is no opportunity to seek Tax Court relief in this instance, but under the law, the taxpayer could get judicial review by paying the tax and seeking review in the Federal District Court.  As such, this does constitute a prior opportunity to seek judicial review.  Lesson  – always seek Appeal review after issuance of Letter 1153 if there are arguments to be made for relief from assessment.