A Prior Letter 1153: Can You Dispute the Trust-Fund Penalty at a CDP Hearing?

A Collection Due Process hearing about payroll-tax penalties is not automatically a second opportunity to argue that you were not a responsible person. Before building that defense, identify whether an earlier IRS Letter 1153 already offered an opportunity to contest the same personal trust-fund recovery penalty. The notice, delivery evidence and prior response can control which issues remain available.

The January 7, 2026 decision in Crawford v. Commissioner, T.C. Memo. 2026-3, illustrates this threshold. The court found that the taxpayer received Letter 1153 but did not protest. It therefore would not reconsider the underlying penalty liability through the later collection proceeding. That did not eliminate every collection issue or the IRS’s obligation to verify applicable procedures. Official opinion, pages 9–11.

Match the Earlier Letter to the Personal Liability

Begin with the actual Letter 1153 and Form 2751, rather than a general recollection that the business received a tax bill. Record the named individual, employer, quarters and proposed trust-fund penalty. Compare them with the later lien or levy hearing notice. A business’s employment-tax debt and an individual’s section 6672 penalty are related, but the earlier document must be identified before its procedural significance can be assessed.

Letter 1153 provides a route to appeal a proposed personal penalty before assessment. Our existing Letter 1153 guide addresses the role, authority and payroll evidence needed at that stage. This guide addresses a different question: What that earlier opportunity means after collection begins.

In Crawford, the taxpayer did not challenge receipt during the original CDP request, which sought collection alternatives. He first asserted nonreceipt in his objection to the Commissioner’s later summary-judgment motion. The court examined the delivery record rather than treating that later assertion as sufficient. Crawford, at 3, 7, 10.

Separate Proper Mailing from an Opportunity Actually Provided

The opinion distinguishes the preliminary notice required before assessment from the opportunity to dispute liability for purposes of section 6330(c)(2)(B). Mailing Letter 1153 by certified mail to the last known address satisfied the preliminary notice requirement in that case. The court separately explained that a Letter 1153 neither received nor deliberately refused does not constitute an opportunity to dispute the penalty. Its prior-opportunity conclusion rested on a separate finding of actual receipt, not proper mailing alone. Id. at 9–10.

That distinction makes delivery evidence consequential. Preserve the complete letter and envelope, address history, certified-mail receipt, return receipt, available tracking and communications with the IRS or representative. If the account says the letter was delivered, identify the particular fact you dispute and supporting evidence. Do not assume either that mailing alone proves every aspect of receipt or that a bare denial defeats documented delivery.

In Crawford, USPS Forms 3800 and 3811, together with the revenue officer’s notes confirming receipt of the return receipt, supported the finding that the taxpayer actually received Letter 1153. He supplied no further evidence supporting nonreceipt. The resulting bar was based on that record, not a rule that every claimed delivery problem is irrelevant. Id. at 10.

Present the Threshold and Supporting Proof During the Hearing

Make the earlier-opportunity question an explicit part of the CDP issue list when it is genuinely disputed. State which tax and period it concerns, what notice was received or missing, what appeal was offered, and what response followed. Provide the evidence supporting that chronology, and keep proof of what was submitted.

The court in Crawford explained that it cannot consider issues not raised during the CDP hearing. It also treated a hearing after remand as a supplement to the original hearing, not an entirely new proceeding. A later remand therefore should not be assumed to reopen every issue or erase the original submissions. Id. at 8–9.

The version checked for this October 16 update, Treasury Regulation section 301.6330-1(e)(3), Q&A-E2, likewise identifies a prior offered Appeals conference as an opportunity to dispute liability, with a separate qualification for taxes subject to deficiency procedures. Its paragraph (e)(4), example 3 specifically concerns a taxpayer declining an offered conference about an assessed trust-fund penalty. Those rules should not be generalized to every IRS conversation or every kind of tax. Current regulation.

Keep Verification and Collection Alternatives on Their Own Tracks

If underlying liability is barred, a CDP hearing can still involve properly raised collection issues. In Crawford, the court reviewed rejection of an offer in compromise for abuse of discretion rather than deciding anew whether the taxpayer owed the penalty. It also reviewed whether the IRS verified required procedures, including written supervisory approval. The first summary-judgment request had been denied for inadequate verification proof; the case later returned with a supplemental record. Crawford, at 6, 9–13.

Build separate folders for the prior-opportunity dispute, procedural verification and the collection alternative actually proposed. A challenge to liability does not supply financial evidence supporting an offer, and checking an installment-agreement box is not the same as proposing one. Any separate refund or other liability-review route has its own prerequisites; a CDP issue list does not choose that route for you.

The immediate objective is a supported account of which questions remain open. Bring the earlier penalty notice and delivery materials, the current collection notice, the CDP request and submissions, and any actual financial proposal. Our tax services page describes the practice. Do not wait for a court filing to assemble evidence about the notice that controlled an earlier appeal opportunity.