Ask The California Employment Tax And Payroll Tax Attorney – The 30-Day Period For Requesting A CDP Hearing Can Be Equitably Tolled And Waived By The IRS

By Robert S. Schriebman

2023

Introduction

What is the meaning of a CDP hearing? CDP stands for Collection Due Process. The laws dealing with CDP hearings can be found in Sections 6220 and 6230 of the Internal Revenue Code. A CDP hearing allows a tax debtor to work out a payment arrangement or other resolution administratively with the IRS Appeals Division without the fear of enforced collection action by the IRS’ Collectors. I am proud to say that I am the author of this process and worked with the late Senator William Roth, of Roth IRA fame, in designing and implementing an administrative process so tax debtors did not have to live in fear of the collector.

CDP Petition Deadlines

When notified, a taxpayer has 30-days to file a CDP petition to take advantage of the process. A timely petition will mean that the taxpayer has a right to take the IRS to the US Tax Court or US District Court if things cannot be worked out with the Appeals Division. If a taxpayer misses the 30-day deadline, and files a petition within one year, the taxpayer will receive an “equivalency hearing” which will allow for an Appeals hearing, but no right to go to court.

Equitable Tolling – the Organic Cannabis Foundation LLC Case

The Organic Cannabis Foundation, LLC, 161 TC -, No.4, Dec. 62,282 (2023)

This is a very important case. What happens if the taxpayer misses the 30-day petition deadline? Is the taxpayer only entitled to an equivalency hearing? The 30-day filing deadline has been held by the US Supreme Court not to be set in stone but may be extended under “equitable” circumstances. This means that Appeals has the discretion to waive the 30-day period. This elastic timeframe now applies to CDP hearings. Having said this, the Tax Court did not define the parameters of this exception. The Court left everything up in the air. This is what the Organic Cannabis Foundation case is all about.

Some Suggestions for Equitable Tolling

The best place to develop guidelines for granting more time may be the reasonable cause standards for penalty abatement set forth in the IRS Manual. Here are a few:

• Death, serious illness or unavailable absence.
• Fire, casualty, natural disaster or other disturbance.
• Inability to obtain necessary records.
• Error or forgetfulness on the part of the taxpayer or a subordinate.

IRC §6511(h)

This section involves the granting of additional time to file a claim for refund if a taxpayer is “financially disabled.” An individual is financially disabled if he/she is unable to manage financial affairs by reason of a medically determinable physical or mental impairment. This standard may also be used in CDP filing deadlines.

Conclusion

Equitable tolling allows the IRS Appeals Division and the Courts to use standards of fairness and equity when dealing with statutory time deadlines. In the future, this doctrine may be expanded for other time limits set forth throughout the Internal Revenue Code.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.  Mr. Schriebman is in private practice.  He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.

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