Due Process

IRS Restructuring & Reform Act of 1998
Due Process Law Change

IRC 6330
(Notice and opportunity for hearing before levy)

Form 12153 Collection Due Process Request

Under current law, the IRS is entitled to seize a taxpayer's property by levy if the federal tax lien has attached to the property. The tax lien arises automatically when (1) a tax assessment has been made, (2) the taxpayer has been given notice of the assessment stating the amount and demanding payment, and (3) the taxpayer has failed to pay the amount assessed within 10 days after the notice and demand.

The IRS may collect taxes by levy on a taxpayer's property or rights to property (including accrued salary and wages) if the taxpayer neglects or refuses to pay the tax within 10 days after notice and demand that the tax be paid. Notice of the IRS's intent to collect taxes by levy must be given no less than 30 days (90 days for a life insurance contract) before the day of the levy. The notice of levy must describe the procedures that will be used, the administrative appeals available to the taxpayer and the procedures relating to those appeals, the alternatives available to the taxpayer that could prevent levy, and the procedures for redemption of property and release of liens.

The effect of a levy on salary or wages payable to or received by a taxpayer is continuous from the date the levy is first made until it's released.

If the IRS district director finds that the collection of any tax is in jeopardy, collection by levy may be made without regard to either notice period. A similar rule applies in the case of termination assessments.

Act section 3401 establishes formal procedures designed to ensure due process when the IRS seeks to collect taxes by levy (including by seizure). The due process procedures also apply after notice of a federal tax lien has been filed.

The IRS is required to notify the taxpayer that a notice of lien had been filed. During the 30-day period beginning with the mailing or delivery of that notification, the taxpayer may demand a hearing before an appeals officer who has had no prior involvement with the taxpayer's case.

Before the IRS can levy against a taxpayer's property, it will be required to provide the taxpayer with a "Notice of Intent to Levy," similar to that currently required under section 6331(d). The notice would not be required to itemize the property the IRS seeks to levy on. Service by registered or certified mail, return receipt requested, will be required.

Subject to the exceptions noted below, no levy could occur within the 30-day period beginning with the mailing of the Notice of Intent to Levy. During that 30-day period, the taxpayer may demand a pre-levy hearing before an appeals officer who generally has had no prior involvement with the taxpayer's case.

If a return receipt is not returned, the IRS may proceed to levy against the taxpayer 30 days after the Notice of Intent to Levy was mailed. The IRS must provide a hearing equivalent to the pre-levy hearing if later requested by the taxpayer. However, the IRS isn't required to suspend the levy process pending the completion of a hearing that is not requested within 30 days of the mailing of the notice.

An exception to the general rule prohibiting levies during the 30-day period applies in the case of state tax offset procedures, and in the case of jeopardy or termination assessments.

No seizure of a dwelling that is the principal residence of the taxpayer or the taxpayer's spouse, former spouse, or minor child will be allowed without prior judicial approval. Notice of the judicial hearing must be provided to the taxpayer and relevant family member. At the judicial hearing, the IRS will be required to demonstrate (1) that the requirements of any applicable law or administrative procedure relevant to the levy have been met, (2) that the liability is owed, and (3) that no reasonable alternative for the collection of the taxpayer's debt exists.

Effective date. The provision is effective for collection actions initiated more than 180 days after the date of enactment (July 22, 1998).

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