Settlement of Docketed Collection Due Process Cases

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The IRS just issued new IRM guidance on the settlement of docketed Collection Due Process (CDP) cases. At this point all CDP cases go to the Tax Court for litigation. The IRM provisions set out the difference between trying to settle a Tax Court case involving a notice of deficiency and one involving CDP. It’s worth discussing the difference and thinking about whether there should be a difference and how the difference impacts the ability to settle and the timing of the settlement.


IRM (08-06-2019) provides:

Settlement of Docketed Collection Due Process Cases

(1) The settlement of liability issues in CDP cases should be done in a manner consistent with the policies applied in deficiency cases. See CCDM, Settlement Policies in Deficiency Proceedings. If Appeals erroneously failed to address liability, the liability should generally be resolved through settlement or trial, as liability is reviewed de novo by the Tax Court. In some instances, though, remand to Appeals for consideration of the underlying liability may be helpful to develop facts or facilitate settlement to avoid further litigation.

(2) For non-liability issues in CDP cases, if the administrative record is complete and Appeals did not err or abuse its discretion, Counsel should generally defend the determination.

(3) Settlement through acceptance of a collection alternative such as a new offer in compromise or installment agreement where there has been no abuse of discretion by Appeals may be appropriate when it is necessary for the fair treatment of a taxpayer or when a lack of settlement could result in unfavorable legal precedent. Otherwise, the determination should be defended and the taxpayer should be encouraged to submit a collection alternative after the litigation is concluded.

(4) Counsel does not have the authority to directly accept collection alternatives from taxpayers on behalf of the Service. If Counsel seeks to settle a docketed CDP case through a collection alternative, Counsel must request the assistance of the Service to evaluate and accept or reject the proposed collection alternative. See IRM, Docketed Collection Due Process (CDP) Cases, for guidance on requesting consideration of offers in compromise in docketed CDP cases.

(5) In lieu of settlement, Counsel can consider filing a motion to remand in the instances discussed in CCDM, Motion to Remand.

The IRM provision in section (1) says that the settlement of liability issues, i.e., litigation in CDP of the merits of the liability, should happen just as it happens in cases in which the petitioner reaches the Tax Court as a result of receiving a statutory notice of deficiency. The examination side of the IRS has essentially delegated to Chief Counsel’s office the ability to settle their cases in Tax Court. When you petition the Tax Court based upon a statutory notice of deficiency, the Chief Counsel attorney has full authority to settle a case without going back to the examination division to ask if it is okay to settle. The Chief Counsel attorney must obtain the consent of their manager but no one contacts the IRS office that generated the case. In the vast majority of cases, the examination side of the IRS really expresses no interest in the case once it is sent to Counsel.

The collection side of the IRS apparently does not trust its attorneys to the same degree that the examination side does. In part (4) of this IRM provision it explains that Counsel does not have the authority to directly accept collection alternatives. This means that even where the taxpayer can convince the Chief Counsel attorney that a proposed collection resolution is appropriate, the Chief Counsel attorney cannot effectuate a settlement to reflect this agreement. Think about what happened in the Dang case blogged here. The revenue officer and the settlement officer told the taxpayer that the IRS would not/could not levy on the taxpayer’s IRA account even though doing so would save the taxpayer the 10% excise tax imposed by IRC 72(t) and, in this case, about $10,000. The Chief Counsel attorney seemed to get it right away that the IRS could levy on the IRA account and that doing so made perfect sense yet the Chief Counsel attorney could not settle this collection matter and had to send the case back to Appeals so it could enter into the settlement agreement. This caused delay, additional interest, unnecessary processing and anguish.

Why is it that Chief Counsel attorneys can settle the underlying tax but cannot settle the collection of the tax? Appeals can settle both. Are Chief Counsel attorneys not trusted by their client? Are they not competent enough in collection matters to make a good decision? I really don’t know why Chief Counsel attorneys must send back collection cases to their client to settle. It seems to me that it would make sense not to create this dichotomy. Department of Justice attorneys can and do settle collection suits all the time. It’s not rocket science. I suggest giving Chief Counsel attorneys the ability to settle collection matters. It would make CDP cases resolve more easily when there is a mistake. It would avoid unnecessary remands. It would recognize that Chief Counsel attorneys understand collection issues and have the ability to resolve them.


  1. William Clayton says

    I believe Chief Counsel has determined attorneys time is too valuable to be evaluating financial statements and collection alternatives. I am also pretty sure Counsel attorneys do not have access to several tools used by Collection employees to verify financial statements provided by taxpayers.
    DOJ attorneys have Collection liaisons within Collection Advisory who help verify financial statements. I suppose this could be done for Chief Counsel attorneys as well, but there are many more CDP cases than there are DOJ litigation cases requiring financial analysis. It appears to be a cost saving measure to have the analysis done by Collection employees in CDP cases.

  2. I think it is necessary to have Chief Counsel attorneys handle collection issues, especially in light of the completely unreasonable Campus Appeals Offices. It is becoming more and more difficult to obtain the right result at any level below Chief Counsel.

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