There are situations which require the aid of the courts to collect or recover taxes, or provide additional protection to the Government. Taxpayers may also use the courts to obtain relief from perceived wrongs caused by Government actions. This handbook, IRM 25.3, Litigation and Judgments, contains procedures for initiating civil judicial actions or defending actions brought against the United States or IRS employees.

Because it is less expensive and time consuming to collect taxes by using administrative processes, bringing a judicial action should usually be a last resort. See IRM 25.3.2, for criteria for bringing civil actions.

Once the decision is made to proceed by judicial action, timely and thorough preparation of the case is essential to ensure successful litigation.

See IRM 5.17.4, Legal Reference Guide for Revenue Officers, Suits by the United States, for additional information regarding the most common types of suits that can be brought by the United States for effecting or assisting in the collection of taxes.

See IRM 5.17.12, Legal Reference Guide for Revenue Officers, Investigations and Reports, for additional guidance for

See the following IRM sections for information about specific types of suits:

There is statutory authority for bringing different types of suits against the United States, such as suits for the recovery of damages for failure to release a lien or for unauthorized collection actions. See IRC §§ 7432 and 7433. The United States may also be named in a suit that involves real or personal property that is encumbered by a federal tax lien. See 28 USC § 2410.

IRM 5.17.5, Legal Reference Guide for Revenue Officers, Suits against the United States, and IRM 25.3.3, Suits Against the United States, contain guidance regarding these types of actions and other principal types of judicial actions that may be brought against the United States.

IRS employees may also be named in judicial actions. See IRM 25.3.4, Suits Against IRS Employees, for procedural guidance.

The authority for the United States to commence a court action for the collection or recovery of taxes is set forth in IRC § 7401.

If additional liabilities are asserted after a suit to collect a tax has been referred to the Department of Justice (DOJ), Area Counsel must issue a supplemental letter to DOJ to request inclusion of the additional liabilities so that the judgment will cover all outstanding obligations of the taxpayer.

Under IRC § 7401, the IRS can also authorize the filing of a counterclaim in a suit filed against the United States. In order to file a counterclaim, there must be an unpaid assessment against the taxpayer for tax, penalty, or interest, and the counterclaim must relate to the same type of tax that is the subject of the existing suit. For example, if the subject of the existing suit is an unpaid assessed tax of a particular type, the counterclaim must be for an unpaid assessed tax of the same type.

The need to file a counterclaim arises most frequently in a Trust Fund Recovery Penalty (TFRP) refund suit filed by the taxpayer. If the taxpayer has not fully paid the assessed amount, the United States will file a counterclaim to reduce the unpaid TFRP balance to judgment with its answer.

Because the authority to authorize DOJ to bring civil actions for the collection or recovery of taxes or to enforce a lien is delegated to the Chief Counsel (see Treas. Regs. §§ 301.7401-1(a) and 301.7403-1)), there is no legal requirement that Collection provide a Form 4477, Civil Suit Recommendation, or other authorization for counterclaims, although such authorization may be sought in individual cases. The Collection Field function must provide to Area Counsel, through Advisory, any information and documentation needed to support the filing of a counterclaim in a given suit.

Because a third party complaint involves the addition of a party who is new to the existing suit, the Collection Field function should provide Form 4477, Civil Suit Recommendation, for the third party complaint.

When a recommendation to collect a Federal tax liability through litigation is referred to the Department of Justice, the collection of the liability is under the control of the Department of Justice. Do not take enforced collection action on any liability of a taxpayer involved in a case in which a suit recommendation has been forwarded to Area Counsel without prior discussion with and concurrence of Advisory, Area Counsel, and, if appropriate, the Department of Justice.

Report any account balance changes on modules in your inventory that are involved in litigation to Area Counsel through Advisory.

IRC § 6331(i), with certain exceptions, prohibits levy or suit to collect the unpaid portion of a divisible tax, such as the Trust Fund Recovery Penalty (TFRP), that is the subject of a refund suit from the plaintiff or plaintiffs in that suit. Consequently, in refund litigation cases involving the TFRP or other divisible taxes, collection action must be suspended unless jeopardy is found or another exception applies. This provision and the related restrictions of IRC § 6672(c) are discussed further in IRM 25.3.3.7.1, Suits Against the United States, Trust Fund Recover Penalty (TFRP) Refund Litigation - Advisory Actions.

Occasionally, Area Counsel or the Department of Justice may request that collection action against entities not involved in litigation be suspended while a test case or a related case is being litigated. In such situations, request written notification from Area Counsel or the Department of Justice to document the request and the reason for suspending collection action against these entities. Advise Area Counsel if there is an imminent Collection Statute Expiration Date (CSED) or if collection against the related entities is in jeopardy. If necessary to suspend the statute of limitations, request that the related entities be joined in the litigation or a suit to reduce their liabilities to judgment be initiated. Note that an additional Form 4477, Civil Suit Recommendation, may be needed to authorize additional legal action.

When collection is being withheld, Advisory will monitor the progress of the litigation to ensure that the case is being pursued.

A suit is commenced by the filing of a complaint with the court. A copy of the complaint, accompanied by a summons, must be served by the plaintiff upon each person named as a defendant in the action. This is referred to as "service of process."

Service of process by the United States when it is the party bringing the suit (i.e., the plaintiff) is discussed further in IRM 25.3.2, Suits by the United States.

Service of process against the United States as a defendant is discussed further in IRM 25.3.3, Suits Against the United States.