On Latin Nerdery and Perfection of Imperfect CDP Appeals

If you have read many of the posts on Briefly Taxing, it should come as no surprise to you that I was a Latin nerd in high school…and college…and at present. The truth of the matter is that I competed nationally, my specialty being Greek mythology. My sophomore year of high school I missed a single question on the national exam. One question. My Latin teacher, one of my favorite people in the entire world, patted me on the shoulder and reminded me that no one is perfect. It was cold comfort to me then, and remembering it as I begin this post, it is cold comfort to me now. That being said, I will never forget that the staff Dionysus carries is called a thyrsus.

Meanwhile, Back at the Tax Ranch

What the bloody hell does this have to do with tax? In general, the IRS tolerates nothing less than perfection, especially when it comes to deadlines. For example, if a taxpayer receives a notice of intent to levy, he has 30 days in which to file a collection due process (CDP) hearing request. Innumerable Tax Court cases have been decided against taxpayers who file the request on the 31^st day. We have previously written about mailing rules, postmarks, and the like, which illustrate just how persnickety the IRS and the Tax Court are about deadlines.

Even if a taxpayer files a CDP request on time, the battle is not yet over. The request itself must also be perfect. In some cases, Forms 12153 or other written hearing requests are timely filed, but incomplete. The hearing request may be missing required information, or it may be missing an authorized signature.

Dick, the Intervening CPA

For example, your long-time clients Rutherford and Bea Hayes have been under audit for their 2018 income tax return. Because it’s not your first rodeo, you had Rutherford and Bea execute a Form 2848 for tax years 2015 through 2021. When the IRS filed a notice of intent to levy with respect to their 2019 return, you timely filed a CDP request, sent in Form 12153, and patiently waited for the IRS respond. Unbeknownst to you, a couple months prior, Rutherford’s CPA, who we’ll call Dick for purposes of this post, also filed a Form 2848, which revoked yours. As a consequence, your signature was no longer authorized.

Having not heard from the IRS, you call the examining agent and politely ask what the hell is going on. He explains that you are no longer an authorized representative because of Dick’s intervening and revoking power of attorney.  As a consequence of its imperfection, your CDP request was “untimely,” and the agent (also a Dick) tells you there’s not a damn thing you can do about it.  He cackles into the receiver and hangs up to go kick a kitten.  Surely, this cannot be right.  Before you call Dick (the CPA) to lambaste him for screwing Rutherford and Bea out of their appeals rights, you wonder if there is a way to “perfect” an imperfect CDP request…

Perfecting an Imperfect CDP Request: The Internal Revenue Manual

The first step to perfection is timeliness.  If the imperfect CDP request was untimely, there’s no hope.  Assuming that it was timely (albeit imperfectly) filed, the IRM provides that a taxpayer may “perfect the request” subsequent to a timely submission.  See IRM 5.1.9.3.2.3. In order to “perfect” a processable, but incomplete, CDP request (including one which is otherwise valid and timely but for a proper POA on file pursuant to IRM 5.1.9.3.2.3(3)), the taxpayer must provide certain information which is outlined in IRM 5.1.9.3.2.3(1)(a)-(f).

If the hearing request is timely but not processable when received and, within the reasonable time period specified, the taxpayer makes the request processable, then the hearing request is considered timely filed.  IRM 5.1.9.3.2.3(4).  Such request is timely even if the perfection occurs after the end of the time frame for requesting a timely hearing.  Id.  However, if the taxpayer makes the request processable after the “reasonable perfection period,” the IRS will treat the request as a new request.

If the hearing request is filed timely, but needs to be perfected, the IRS is required to make a reasonable attempt to contact the taxpayer and allow a reasonable time (generally 15 calendar days) for the taxpayer to perfect the request. Thus, Dick (the IRS agent) should have, at the very least, picked up the phone and called Dick (the CPA) or Rutherford/Bea. When the request is signed on the taxpayer’s behalf by an unauthorized representative, the taxpayer may perfect the request by affirming in writing that the request was submitted on the taxpayer’s behalf.  IRM 5.1.9.3.2.3(2).

Perfecting an Imperfect CDP Request: The Treasury Regulations

The Treasury Regulations also briefly mention the perfection process.  Specifically, “[i]f the IRS receives a timely written request for CDP hearing that [is processable but incomplete], the IRS will make a reasonable attempt to contact the taxpayer and request that the taxpayer comply with the unsatisfied requirements. The taxpayer must perfect any timely written request for a CDP hearing [which is processable, but incomplete] within a reasonable period of time after a request from the IRS.”  Treas. Reg. § 301.6230-1(c)(2), Q&A, A-C1(iii). Further, a written request submitted within the 30–day period, which is processable but incomplete, “is considered timely if the request is perfected within a reasonable period of time.” See Treas. Reg. § 301.6230-1(c)(2), Q&A, A-C7.

Perfecting an Imperfect CDP Request: Chief Counsel Advisory Memorandum

In a 2008 CCA, the IRS observes that an invalid request for a CDP hearing may be perfected, so long as “the taxpayer corrects the deficiency in such request within a reasonable time period after being contacted by the Service.” See IRS CCA 200816023. This “perfection process” is similar to the process for offers in compromise and other requests for collection alternatives.  See IRS CCA 200137001 (referencing IRM 5.8.3.1(2) which “provides that Service personnel will “work with taxpayers to provide an opportunity to perfect…defects or errors [in an offer for compromise]…rather than returning the offers as unprocessable”).

Perfecting an Imperfect CDP Request: Limited Case Law

A limited number of cases have been decided on the issue.  In United States v. Gilliam, 737 F. App’x 660, 663 (4th Cir. 2018), the Fourth Circuit notes that in the underlying Tax Court matter, the Tax Court had found that the petitioner had perfected his CDP request in a timely manner.  In Humphries v. Commissioner, 2010 WL 3119398, at *5 (S.D. Fla. 2010), the IRS argued against the legal effect of the IRM provision requiring it to allow for perfection.  Interestingly, the Court did not refer to the Treasury Regulations, and ultimately made no finding of law on the issue (finding that a preliminary injunction against was not timely in any event).

Sticking it to Dick

If the IRM were the only leg you had to stand on, then you would, understandably, be moderately wary of the IRS arguing that “IRM governs the internal affairs of the IRS and does not have the force and effect of law,” as it did in Humphries.  However, given the reference to the perfection process in the Treasury Regulations and the Gilliam case, you politely call Dick (the agent) and tell him to shove it…with all due respect.  You next call Dick (the CPA) and remind him that filing a Form 2848 without checking the box “DON’T REVOKE PRIOR POA” and attaching a copy of the prior POA has consequences.  You then call Rutherford and Bea to let them know that all is well.  You next call PETA to report Dick (the kitten kicker).

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