People picture a hearing room. A Collection Due Process hearing almost never looks like that. Most are conducted by telephone or correspondence with a settlement officer from the IRS Independent Office of Appeals, and most of the real work happens in the documents exchanged before and after the call.

Knowing what the settlement officer has to do, and what they can and cannot decide, is how you get value out of the hearing.

Who the settlement officer is

The settlement officer works for Appeals, not Collection. IRC 6330(b)(3) requires that the hearing be conducted by an officer or employee with no prior involvement with the unpaid tax before the first CDP hearing. Treas. Reg. 301.6330-1(d)(2), Q&A-D4, defines prior involvement narrowly: the officer must have actually participated in a prior non-CDP matter involving the same taxpayer, tax, and period. You can waive the requirement in writing, but rarely should.

The settlement officer also operates under the Appeals ex parte rules. They should not be discussing the merits of your case privately with the revenue officer who proposed the levy. See our guide to the ex parte rules.

The format: informal by design

Treas. Reg. 301.6330-1(d)(2), Q&A-D6, says CDP hearings are informal. The Administrative Procedure Act's formal hearing procedures do not apply. A hearing may be a face-to-face meeting, one or more written or oral communications, or a combination. No transcript or recording is required.

Q&A-D7 says a taxpayer who presents relevant, non-frivolous reasons for disagreement will ordinarily be offered a face-to-face conference at the Appeals office closest to the taxpayer's residence, or for a business, its principal place of business. If that does not work, telephone or correspondence is available. In practice, most hearings happen by phone. Ask for the format that serves your case.

The first letter: deadlines that matter

After the case is assigned, the settlement officer usually sends a letter scheduling a conference and asking for documents. Commonly requested items include:

  • A completed Form 433-A (individuals) or Form 433-B (businesses), or Form 433-F, with supporting statements.
  • Proof that all required returns are filed.
  • Proof of current estimated tax payments or federal tax deposits.
  • A specific proposal: the installment amount, the offer amount, or the request for currently not collectible status.

Meet those deadlines. If you cannot, ask for more time in writing before the deadline passes. Under Q&A-F3, an issue is not properly raised if you fail to present evidence after being given a reasonable opportunity. A settlement officer who sets a reasonable deadline and receives nothing can close the hearing, and the Tax Court will usually not fault them for it.

What the settlement officer must decide

IRC 6330(c)(3) lists three things the determination must take into account.

1. Verification

Under IRC 6330(c)(1), the officer must obtain verification that the requirements of any applicable law or administrative procedure have been met. Was the tax properly assessed? Was notice and demand sent? Was the CDP notice properly issued? Was required managerial approval for penalties obtained? This is the government's homework, and it is checked whether or not you raise it. You should still raise specific defects you know about.

2. The issues you raised

IRC 6330(c)(2) covers spousal defenses, challenges to the appropriateness of collection, collection alternatives, and in some cases the underlying liability. The officer must address each issue you properly raised.

3. The balancing test

IRC 6330(c)(3)(C) requires the officer to consider whether the proposed collection action balances the need for efficient collection with your legitimate concern that collection be no more intrusive than necessary. This is where you explain why a levy on a particular asset or account is excessive in light of a reasonable alternative.

Collection alternatives: what the officer can approve

Treas. Reg. 301.6330-1(e)(3), Q&A-E6, lists collection alternatives: withholding the levy in circumstances that will facilitate collection, an installment agreement, an offer in compromise, posting a bond, or substituting other assets. It adds a limit: an alternative is not available unless it would be available to other taxpayers in similar circumstances. The settlement officer applies the same financial standards Collection uses.

Offers in compromise raised in CDP are often sent to an offer unit for investigation, with Appeals retaining the case. That can add months, and it is still often the right call.

If your proposal is currently not collectible status rather than a payment plan, expect the officer to test it against the same allowable expense standards. The firm's overview of currently not collectible status explains what that status does and does not do.

On the call

  • Lead with your proposal. "We are asking for an installment agreement of $X per month, supported by the 433-A we sent on a stated date."
  • Address their calculation. If the officer computes a higher payment, ask which expenses were disallowed and why. Allowable expense disputes are often winnable with documentation.
  • Raise the balancing test explicitly. Explain why the proposed levy is more intrusive than necessary.
  • Confirm next steps in writing. Follow up by letter or fax summarizing what was discussed and what the officer asked for.

Here's the part most people miss: the administrative record is being built during this process. Under Q&A-F4, the record for Tax Court review includes your request, written communications, the officer's notes of oral communications, and the documents relied upon. Your follow-up letters become part of that record. Your unrecorded phone explanations may not.

Mistakes that sink CDP hearings

  • Proposing a payment you cannot keep. An installment agreement that defaults in four months puts you back where you started, without the CDP protection you just used.
  • Being out of compliance. Unfiled returns or missed estimated payments usually end the discussion of alternatives. Fix compliance first.
  • Arguing only fairness. "The IRS has been unreasonable" is not an issue the officer can act on. A specific alternative and a specific expense dispute are.
  • Going silent after the call. Officers often send a follow-up request with a short deadline. Missing it can end the hearing.
  • Raising issues only in Tax Court. If it is not in the administrative record, it usually cannot be argued later.

The Notice of Determination

Q&A-E8 says Appeals sends a dated Notice of Determination by certified or registered mail. It states whether verification requirements were met, resolves the issues you raised, addresses your collection alternatives, and states whether the proposed collection action balances efficiency against intrusiveness.

If you agree, the determination is carried out, often through an installment agreement or other alternative. If you disagree, you have 30 days to petition the Tax Court under IRC 6330(d)(1). See the CDP petition deadline.

Let's talk

A CDP hearing rewards preparation that happens before the call. If you have a hearing scheduled, call (813) 229-7100 and let's build the record together.