4.15.4  Administrative and Judicial Review

Manual Transmittal

January 24, 2012

Purpose

(1) This transmits revised IRM 4.15.4, Jeopardy/Termination Assessments, Administrative and Judicial Review.

Background

This chapter provides examiners with information and guidance on jeopardy/termination assessments.

Material Changes

(1) Minor editorial changes have been made throughout this IRM. Legal references, form and letter references, and IRM references were reviewed and updated as necessary.

(2) IRM 4.15.4.3.1, Jurisdiction, was deleted entirely and the remaining sections were renumbered.

Effect on Other Documents

This material supersedes IRM 4.15.4, dated August 16, 2001.

Audience

SB/SE Compliance Employees

Effective Date

(01-24-2012)

Signed by
Tamera L. Ripperda
Director, Abusive Transactions Technical Issues (ATTI)

4.15.4.1  (01-24-2012)
Overview

  1. This section discusses IRC 7429 which provides for administrative and judicial review of jeopardy and termination assessments. Jeopardy/termination assessments under IRC 6867 are not entitled to administrative and judicial review, under IRC 7429.

4.15.4.2  (01-24-2012)
Administrative Review

  1. A taxpayer may request an administrative review of a jeopardy/termination assessment. Administrative review is a prerequisite to later judicial review. See Machado v. United States, 80-1 USTC (CCH) ¶ 9323 (S.D. N.Y. 1980). Generally, the Service has 15 days for administrative review.

4.15.4.2.1  (01-24-2012)
Written Statement to Taxpayer

  1. IRC 7429(a)(1)requires that the taxpayer be provided a written statement of the information used to prepare the jeopardy/termination assessment within five days after the day on which an assessment is made.

  2. The following items make up the written statement:

    1. Pattern letters. These letters provide the amount of the tax and directs the taxpayer to the attached computation to show how the tax was determined. They cite the applicable code section, provides the computation of tax, and notifies the taxpayer of his/her right of appeal and the right of review under IRC 7429. See paragraph 3 below for the types of pattern letters.

    2. Tax computation.

    3. Narrative.

  3. Pattern letters used are as follows:

    Reference Location
    Pattern Letter 1583 IRM Exhibit 4.15.2-1
    Pattern Letter 1584 IRM Exhibit 4.15.2-2
    Pattern Letter 1929 IRM Exhibit 4.15.2-3
    Pattern Letter 1930 IRM Exhibit 4.15.2-4

4.15.4.2.2  (01-24-2012)
Notice & Demand to Pay Tax

  1. IRC 6851, IRC 6861, and IRC 6862 require the Service to present immediately, to the taxpayer, a notice and demand to pay tax. Generally, Form 3552, Prompt Assessment Billing Assembly, is used for notice and demand. Form 3552 is prepared by Collection with certain modifications. If Form 3552 is not available, copy the text of one on IRS letterhead stationery.

4.15.4.2.3  (01-24-2012)
Request for Review

  1. A taxpayer may file a request for review of the assessment action, in writing, with the Area Director generally within 30 days of the date of the assessment.

  2. Under IRC 7429(a)(2), a taxpayer may request an administrative review of the assessment action within 30 days, after:

    1. The day the taxpayer is provided the Notice of Assessment and Right of Appeal; or

    2. The last day of the period the Notice is required to be furnished to the taxpayer (35 days after the assessment if the notice is not timely delivered).

      Note:

      IRC 6851, IRC 6861, and IRC 6862 requires the Service to immediately present to the taxpayer a notice and demand to pay tax.

  3. The taxpayer may request, in writing, a conference for administrative review.

  4. The taxpayer must file the written request with the Area Director.

  5. The request will be forwarded to the Examination Jeopardy/Termination Coordinator (coordinator) identified in IRM 4.15.2.2, Examination Procedures. The coordinator will forward the request to the Technical Services Manager. The coordinator will keep a copy of the request for his/her file.

  6. Technical Services will monitor the course of administrative review procedures initiated by the taxpayer. Technical Services will notify Appeals of any request for review filed by the taxpayer within one day of receipt. The entire file, including the request for administrative appeal, should be gathered and transmitted to Appeals.

    Note:

    The Technical Services Manager has overall responsibility for liaison between the operating divisions, CI, Appeals, and Counsel. Responsible Service employees must keep Technical Services informed of the status of the case. The Technical Services Manager's responsibility is strictly liaison. The responsibility for taking necessary actions on any case remains with the organization having jurisdiction for taking the required actions.

4.15.4.2.4  (01-24-2012)
Redetermination by the Secretary

  1. Under IRC 7429(a)(3), Appeals considers the taxpayer's request for administrative review. When feasible, Appeals grants an immediate conference and within 15 days after the request is filed determines whether:

    1. The making of the assessment is reasonable under the circumstances; and

    2. The amount assessed is appropriate.

  2. A determination is made by the Appeals Officer based on the taxpayer's written request and additional information furnished.

  3. If a taxpayer files a civil suit at any time prior to the conclusion of the administrative appeals, Appeals procedures will be suspended.

  4. Appeals consideration results in one of the following actions:

    1. Assessment sustained in full (the action and the amount of tax are correct);

    2. Assessment sustained in part (the amount of tax assessed is redetermined);

    3. Assessment is not reasonable or warranted (for example, collection of tax is not in jeopardy); or

    4. Taxpayer agreement to the assessment and the amount assessed in full or in part.

  5. Exam will take the appropriate action depending upon whether the taxpayer agrees or disagrees with Appeals' consideration.

    1. If the taxpayer agrees with the Appeals determination, the taxpayer will be requested to pay the tax. The Area Director will be notified to abate any excessive tax assessed as determined by Appeals.

    2. If it is determined that the action was not warranted, the Area Director will be notified by Appeals to abate all of the tax assessed, release liens and levies as necessary, and process refunds or credits as necessary.

    3. If the taxpayer does not agree with the Appeals determination, the taxpayer will be informed of his/her right for judicial review.

  6. The file will be returned, including any Appeals reports and transmittal memorandums, to Technical Services.

4.15.4.3  (01-24-2012)
Judicial Review

  1. Under IRC 7429(b)(2) a taxpayer may request a judicial review of the assessment action within 90 days after the earlier of:

    1. The day the Service notifies the taxpayer of the determination of the administrative appeal; or

    2. The 16th day after a request for review was made.

  2. Technical Services will monitor the course of administrative review procedures initiated by the taxpayer. Technical Services will notify Counsel of any court proceedings commenced by the taxpayer. The entire file, including the request for administrative appeal and information developed in reviews, should be gathered and transmitted to Counsel within one working day.

4.15.4.3.1  (01-24-2012)
Determination

  1. Under IRC 7429(b)(3), the court considers the taxpayer’s request for judicial review and within 20 days after a proceeding is commenced under IRM 4.15.4.3, Action by Examination, determines whether:

    1. The making of the assessment is reasonable under the circumstances; and

    2. The amount assessed is appropriate.

  2. A determination is made by the court based upon all the facts known at the time of the review. The facts are not limited to facts known at the time the assessment was made.

  3. If the taxpayer requests an extension of the 20 day period and establishes reasonable grounds for the request, the court may grant an extension of up to 40 additional days.

  4. If the court determines that the taxpayer did not properly serve the United States within 5 days after the taxpayer filed action, the commencement of the 20 day period may be postponed until proper service is made.

  5. Court review results in one of the following actions:

    1. Assessment is reasonable;

    2. Assessment is unreasonable; or

    3. Assessment amount is inappropriate.

  6. A determination made under IRC 7429 affects only the jeopardy/termination assessment.

4.15.4.3.2  (01-24-2012)
Action by Examination

  1. During judicial review, there will be some determinations that the jeopardy/termination assessment has been improperly made or that the amount assessed was excessive. Appeals will determine the decrease in tax, penalty, and interest. The Area Director will be notified by Appeals to abate any excessive tax assessed, release any liens and levies, and process refunds or credits.

  2. The file will be returned to Technical Services, who will relay the results of the judicial determination to Exam or Collection, depending on where the case is open.

4.15.4.3.3  (01-24-2012)
Burden of Proof

  1. The government has the burden of proving whether the making of the jeopardy/termination assessment is reasonable under the circumstances. The taxpayer has the burden of proving the reasonableness of the amount assessed.

4.15.4.3.4  (01-24-2012)
Finality of Determination

  1. Any determination made by a court under IRC 7429 is final and will not be reviewed by any other court.

4.15.4.4  (01-24-2012)
Area Review

  1. The Area Director will provide that reviews are conducted of the jeopardy/termination assessments ensuring that the area is complying with IRM procedures, Policy Statement 4–88, IRM 1.2.13.1.27, and Policy Statement 4-89, IRM 1.2.13.1.28.


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