- 25.3.5 Judgment Follow-up
- 126.96.36.199 Judgments for Assessed or Unassessable Liabilities
- 188.8.131.52 Effect of Judgment for Assessed Liabilities on Tax Lien and Levy
- 184.108.40.206 General Responsibilities
- 220.127.116.11 Advisory Procedures for Judgments for Assessed and Unassessable Liabilities
- 18.104.22.168 Revenue Officer Procedures
- 22.214.171.124 Procedures for Judgments for Assessed Liabilities
- 126.96.36.199 Procedures for Judgments for Unassessable Liabilities
- 188.8.131.52 Assessment of Court Sanctions, Penalties, and Costs
- 184.108.40.206 Offers in Settlement
- 220.127.116.11 Actions When the Judgment Debtor Relocates
- 18.104.22.168 Closing Actions
- 22.214.171.124.1 File Retention and Disposition
Part 25. Special Topics
Chapter 3. Litigation and Judgments
Section 5. Judgment Follow-up
March 20, 2012
(1) This transmits revised IRM 25.3.5, Litigation and Judgments, Judgment Follow-up,
(1) IRM 126.96.36.199(8) Editorial changes per IRM 188.8.131.52 to correct fax listing and website address for MySB/SE Collection Case Processing (CCP)
Scott D. Reisher
Director, Collection Policy
Judgments entered in a civil tax case may be for assessed tax liabilities or for liabilities that cannot be assessed (i.e., unassessable liabilities). For example, a suit to reduce tax assessments to judgment will result in a judgment being entered against the taxpayer against whom the assessments were made for the entire amount of the outstanding tax liabilities.
Suits that may be brought against taxpayers or third parties that may result in money judgments but not for assessed tax liabilities include the following:
suit to recover an erroneous refund,
suit for failure to honor a levy,
suit to collect unpaid employment taxes under IRC § 3505, the Miller Act, or under third-party contract rights,
suit to collect against transferees for liabilities not imposed under IRC § 6901,
suit in which sanctions, costs, or fees are awarded that cannot be assessed under IRC § 6673(b), and
suit in which restitution amounts that cannot be assessed as taxes are ordered payable to the IRS.
This category does not include liabilities that have been abated due to premature posting of TC 608. Such liabilities should be reestablished using the procedures in IRM 184.108.40.206.2.2(4), Cases with Imminent CSEDs.
Responsibilities for the collection of judgments for assessed and unassessable liabilities are discussed below.
When a tax assessment is reduced to judgment, the federal tax lien created under IRC § 6321 does NOT merge into the judgment, but continues to exist independently. Therefore, when assessed tax liabilities are reduced to judgment, the Government has two different collection avenues available:
the assessed tax liabilities may be collected by levy under the Internal Revenue Code, or
the judgment may be enforced under the Federal Debt Collection Procedures Act (FDCPA).
Because the federal tax lien does not merge with the judgment lien, the time periods applicable to judgment liens do not apply to the federal tax lien. If a suit is timely filed to reduce tax assessments to judgment, IRC § 6502(a) provides that the time period for collecting the tax is extended until the judgment is satisfied or becomes unenforceable. Accordingly, the IRS may pursue administrative collection action indefinitely against the taxpayer's real or personal property.
In order to maintain the IRS's lien priority, it is important to ensure that Notices of Federal Tax Lien (NFTLs) are timely refiled during the refiling period after a judgment is entered. See IRM 220.127.116.11, Refiling the NFTL. It is equally important to ensure that the liens do not release during the pendency of the litigation. The pending suit does not prevent release of a lien if a self-releasing NFTL has been filed. Accordingly, NFTLs must be timely refiled during the pendency of litigation to prevent release of the lien.
Although the collection statute is extended indefinitely under IRC § 6502(a) when a timely suit to reduce assessments to judgment is filed and the judgment is obtained, the case will remain in active status only as long as there is collection potential.
Primary responsibility for the initial collection of judgments entered in favor of the United States rests with the Department of Justice (DOJ). As a general rule, the DOJ Financial Litigation Unit (FLU) will collect judgments for money due, other than payments to be made as part of a bankruptcy case or plan. Both the Tax Division and U.S. Attorney Offices have FLUs. The FLU may request advice and assistance from the IRS. See IRM 18.104.22.168, Collection of Judgments, for a general discussion of the legal aspects of judgment collection.
After the judgment has been entered, or a settlement is reached, the DOJ Trial Section transfers the case to the Tax Division FLU, which is responsible for attempting to collect the judgment. When collection efforts are exhausted, the FLU will transfer the case back to the DOJ trial section for closing and notification to the IRS. At this point, collection jurisdiction is generally returned to the IRS. However, jurisdiction to compromise a judgment is retained by DOJ.
Advisory is responsible for the initial processing of judgments and must follow up as appropriate on all active judgments for assessed and unassessable liabilities.
Compliance Services Collection Operations (CSCO) is responsible for monitoring taxpayers' compliance with settlements in judgment cases requiring future actions. See IRM 22.214.171.124, Offers in Settlement, below.
Revenue officers may be called upon to assist in collecting judgments and conducting follow-up investigations. Involvement may be in the form of courtesy investigations initiated by Advisory or direct Bal Due case assignments.
Once a judgment is granted, Advisory will close any Non-Field Other Investigation ("NF OI" ) that may be open for the case and open another NF OI using case code 135, Judgments. If all suit related actions have been completed, Advisory will close any ICS suit control module, or NF OI that may be open for the case. If all case actions are not completed in the suit, however, the original ICS suit control module should remain open until all suit actions are concluded.
The advisor assigned to the case is responsible for providing needed assistance to DOJ in obtaining and/or collecting the judgment. This includes conducting investigations using all available internal sources to determine if resources exist for satisfying the judgment, and issuing courtesy investigation requests to the Collection Field function.
If the judgment is transferred by the Tax Division Financial Litigation Unit (FLU) to the local U.S. Attorney's Office, or the judgment was entered in a case handled by the local U.S. Attorney's Office, the advisor will assume responsibility for coordinating with the FLU in that office.
The advisor will conduct appropriate follow-up contacts with the Tax Division FLU and/or the FLU in the local U.S. Attorney's Office to determine the status of collection efforts and to offer assistance in locating assets to satisfy the judgment.
If assets are located that can be seized in satisfaction of the judgment, this information will immediately be communicated to the appropriate FLU.
Follow-ups must be scheduled as appropriate for the case. Follow-up actions may include, as appropriate:
refiling Notices of Federal Tax Lien
requesting transmittal of the abstract of judgment for filing in a district in which real property belonging to the taxpayer is located
determining status of DOJ collection efforts and collection jurisdiction
verifying the correctness of financial information provided to the FLU on a Form 433-A or similar document.
Cases may not be removed from active follow-up status and the NF OI opened for the judgment case may not be closed as long as the case remains with the Department of Justice.
Occasionally, the advisor will request revenue officer assistance in a judgment case. Generally, this will not occur on judgments under $25,000.
When assistance is needed, and after the advisor has exhausted all available internal sources, the advisor will issue an OI requesting that specific actions be taken. This may include identifying assets through public records research or any other type of asset verification deemed necessary.
When a judgment involving assessed liabilities is no longer in active status, a Bal Due case may be assigned to a revenue officer if case selection criteria are met.
Once a judgment is entered in a case where assessments were reduced to judgment, request input of Transaction Code (TC) 550, definer code 4, using 20 years from the date the judgment was entered as the new extension date. This action will extend the CSED on IDRS for 20 years and prevent a TC 608 from being generated automatically and zeroing out the tax module.
A TC 520 cc 80 should still be on the TXMOD prior to the TC 550 input. The TC 520 cc 80 only puts the CSED into suspense, thereby preventing TC 608 from posting and the account being zeroed out during the pendency of the litigation.
The TC 550, definer code 4, must be input before the TC 520 is reversed. This will prevent premature TC 608 posting. If a TC 521 is input before the TC 550, and the CSED fell during the pendency of the litigation, a TC 608 will generate systemically and the account will be zeroed out. This may result in the loss of lien priority if the TC 608 triggers a systemic lien release.
Using the proper transaction date for inputting the TC 550 is also very important. Refer to Document 6209 IRS Processing Codes and Information for the current year to ensure the inputs for the TC 550 are correct thereby avoiding an IMF unpostable code 178 or BMF unpostable code 344-6.
While the timely filing of a suit to reduce assessments to judgment will extend the CSED indefinitely, the IRS has decided that if there is no collection potential with respect to the assessments reduced to judgment, the judgment will not be maintained on IDRS after 20 years from the date of the entry of the judgment. However, if collection sources are identified after this 20-year period, the account may be reinstated and collection actions resumed.
While the judgment control is active, ensure that all applicable Notices of Federal Tax Lien (NFTLs) are properly refiled. Determine the required refiling period and establish ICS controls to follow-up. See IRM 126.96.36.199.2, Required Refiling Period.
Because the federal tax lien does NOT merge into the judgment lien, and NFTLs filed after 11-1982 contain self-releasing provisions which extinguish the tax lien if the notice is not refiled, the NFTL must be timely refiled in order to preserve the federal tax lien and maintain the IRS's priority position. If the NFTL is not timely refiled, the tax lien will be extinguished and actions will need to be taken to revoke the release and reinstate the lien in order to take administrative collection action. See IRM 188.8.131.52, Revocation of Certificate of Release or Nonattachment, and IRM 184.108.40.206, Reinstatement of Lien.
After DOJ advises the IRS (through counsel) that their efforts to collect the judgment have ended, and all terms of applicable settlement agreements have been met, request input of TC 521. If no information relating to the collection of the final judgment is provided by DOJ within 12 months from the judgment date, contact the Tax Division Financial Litigation Unit (FLU) or the FLU of the local U.S. Attorney's office if the case was handled by that office, to determine what, if any, actions are being taken by DOJ to collect the judgment. If DOJ has determined that there is no current collection potential and that it will, or has, closed its case, request written notification that DOJ is closing its case and jurisdiction is being transferred back to the IRS. When the case is referred to the IRS for collection, the TC 520 should be reversed to allow the case to be put back into the collection stream.
Do not request input of TC 521 or close the Advisory ICS judgment control module until all terms of any settlement agreement have been met and this compliance verified.
When the TC 550, definer code 4, with a date 20 years from the judgment date has been entered, this will prevent the CSED from expiring during this time period, so TC 520 cc 80 is no longer needed to suspend the statute. However, as noted above, care must be taken to ensure that NFTLs do not self release.
TC 521 input will return the case to the collection status it was in before the litigation and subject it to normal case selection criteria. If the case is in currently not collectible (53) status, do not reverse the status unless there is indication of collection potential.
After TC 521 input, close the ICS judgment control module and treat the case as an inactive judgment for Advisory case control purposes.
In cases where a judgment is obtained for unassessable liabilities, it is important to ensure that a certified copy of the abstract of judgment is filed in order to create a judgment lien against the judgment debtor's real property. The IRS may not take administrative collection action under the provisions of the Internal Revenue Code against the judgment debtor to collect the judgment if there is no underlying tax assessment or federal tax lien. Instead, collection actions must be taken under the Federal Debt Collection Procedures Act (FDCPA) by the Tax Division or the local U.S. Attorney's Office.
While administrative collection action may not be taken to collect a judgment for unassessable liabilities, with the exception of offsetting tax refunds, the advisor is responsible for coordinating with the appropriate Financial Litigation Unit (FLU) (either in the Tax Division or the local U.S. Attorney's Office depending upon which office is handling the case) to ensure the availability of assistance in conducting investigations using all available internal sources to determine if resources exist for satisfying the judgment.
In appropriate cases, the advisor will issue an OI (Other Investigation) to field collection to assist in locating assets to satisfy the judgment. This may include identifying assets through public records research, or any other type of asset verification deemed necessary.
If assets are located that can be seized in satisfaction of the judgment, this information will immediately be communicated to the appropriate FLU.
The advisor will also take the appropriate steps to ensure that any individual tax refunds of those named in the judgment are offset to the unassessed judgment.
In cases where there is collection potential, the advisor will follow-up with the Department of Justice (DOJ) at a minimum of every six months to determine the status of efforts to collect the judgment. Circumstances may warrant more frequent case activity.
Cases may not be removed from active follow-up status and the NF OI opened for the judgment case may not be closed as long as the case remains with DOJ.
See IRM 220.127.116.11 for information relating to court orders requiring the taxpayer to pay restitution to the IRS in criminal cases.
The United States, like any other party to litigation, is entitled to an award of costs when it prevails in an action. Costs that may be awarded include fees of court reporters, fees for witnesses, and the fees of the U.S. Marshal for service of summonses and subpoenas.
Under IRC § 6673(b), the IRS may assess and, upon notice and demand, collect (in the same manner as a tax) any monetary sanctions, penalties or costs awarded by the court to the United States. See IRM 18.104.22.168.3, Assessment of Court Sanctions, Penalties, and Costs, for further discussion of this provision.
Requests for assessment under IRC § 6673(b) will generally come from the Department of Justice (DOJ). These requests must include a copy of the court order providing for the award of monetary sanctions, penalties or costs to the IRS. DOJ will send the request to the Area Counsel attorney assigned to the case for appropriate routing within the IRS. In collection cases handled by Advisory, a request for an IRC § 6673(b) assessment will be routed by the Area Counsel attorney to the advisor assigned to the case.
Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, is used to request assessments under IRC § 6673(b). If possible, the advisor assigned to the case will complete the Form 8278 within 14 calendar days of receiving a request for assessment, a copy of the court order, and any additional information that may be needed.
While there is no Assessment Statute Expiration Date (ASED) for an assessment made pursuant to IRC § 6673(b), an assessment must be made before administrative collection actions (e.g., filing a Notice of Federal Tax Lien or issuing a levy) can be taken by the IRS to collect this amount. The request for assessment therefore should be handled promptly.
Complete items 1 through 8 on page 5 of Form 8278, following the instructions for completing the form.
For the Year in Item 5, use the year of the court’s order.
Leave Item 6, the Statute Date, blank, and check the box in Item 4 because there is no ASED for IRC § 6673(b) assessments.
Provide the amount to be assessed on page 5 in the row for Penalty Code Section 6673(b) (currently under H. Other (IRM 20.1.10).
It is important that the correct Penalty Code Section and corresponding Penalty Reference Number (PRN) are provided because the PRN dictates the language in the notice provided to the taxpayer that explains the amount being assessed.
If the amount to be assessed is different from the amount awarded by the court for monetary sanctions, penalties and costs, explain the discrepancy in the Remarks section on page 5 of the form.
Prepare one Form 8278 for each assessment to be made under IRC § 6673(b).
The Advisory Group Manager must review and sign the Form 8278. An electronic digital signature is acceptable.
After manager review and approval, forward page 5 of Form 8278, along with a copy of the court order, to the Field Office Resource Team (FORT) Manager. Requests may be sent either by fax (267–941–1513) or, if the court order can be scanned and sent electronically, by secured email to the FORT Manager. For additional information regarding the FORT, visit the MySB/SE website at http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/casepro/ccpcoll/fort/default.aspx .
An assessment made under IRC § 6673(b) may be collected, upon notice and demand, as a tax. The normal ten-year Collection Statute Expiration Date (CSED), plus any applicable extension/suspension, applies with respect to any administrative collection action (e.g., filing a Notice of Federal Tax Lien or issuing a levy) that may be taken to collect the assessment.
If a Notice of Federal Tax Lien (NFTL) is filed with respect to the IRC § 6673(b) assessment, the date the statutory tax lien arises under IRC § 6321 is the date of the IRC § 6673(b) assessment, and the NFTL refiling period under IRC § 6323(g) is calculated using that date.
If other previously assessed tax liabilities were reduced to judgment in the same court proceeding, procedures for extending the CSED for these other assessments should be followed. See IRM 22.214.171.124, Procedures for Judgments for Assessed Liabilities, above.
Because a judgment was entered in the amount awarded as monetary sanctions, penalties or costs, the procedures of the Federal Debt Collection Procedures Act (FDCPA) will also apply with respect to collecting the amount of the IRC § 6673(b) assessment. If collection potential is anticipated beyond the ten-year period under IRC § 6502 from the date of the IRC § 6673(b) assessment, plus any applicable extension/suspension, contact Area Counsel to determine whether collection actions should be taken under the FDCPA to collect this amount.
After a civil or criminal case has been referred to the Department of Justice (DOJ) or the United States has obtained a judgment for tax liabilities, compromise authority thereafter rests with DOJ.
DOJ may enter into a settlement agreement before judicial action is begun. Apply the procedures that follow in this event as well.
Although DOJ may have referred a judgment back to the IRS for collection, it continues to retain sole jurisdiction to compromise the judgment.
If an Offer in Settlement involves payment of the judgment through a deferred payment or collateral agreement, Compliance Services Collection Operations (CSCO) is responsible for monitoring the taxpayer's compliance with the settlement. See IRM 126.96.36.199.19, Department of Justice (DOJ) Settlements.
TC 521 must not be input, or the Advisory ICS judgment control module closed, until after all settlement terms have been met.
The payment of such judgments is monitored by CSCO in the Monitoring Offer in Compromise (MOIC) Units in Brookhaven and Memphis. The states serviced by each campus are listed on SERP under Who/Where and under Offer-in-Compromise (OIC) Compliance Campus Locations for Back-end.
Advisory is responsible for coordination between DOJ and CSCO. Advisory is the primary point of contact on settlements.
If the taxpayer requests modification of a settlement or collateral agreement, advise DOJ, which alone has authority to modify settlements.
Upon notification by DOJ of an accepted offer that involves a deferred payment or collateral agreement, photocopy the following documents and forward them using Form 3210 to the appropriate MOIC Unit:
deferred payment or collateral agreement
any other information needed to identify the liability and terms of the settlement.
Assist CSCO and DOJ as requested.
Ensure an active TC 520 is maintained on all account modules involved in settlements being monitored by CSCO.
Forward all information received from CSCO relating to these settlements to DOJ. Ensure that DOJ is advised if the taxpayer defaults. Retain copies of forms forwarded to DOJ in the judgment file.
CSCO will notify Advisory when all amounts due under the settlement agreement, including accrued interest and amounts due under a collateral agreement, have been received. After this notification is received, Advisory will then notify DOJ, send them copies of Form 6313 (Collateral Agreement Payment Record) and 6314 (Deferred Payment Offer Payment Record) as appropriate, and request input of TC 521.
See IRM 188.8.131.52.19.1, Processing Accepted DOJ Settlements.
CSCO will send to Advisory a copy of all Forms 6314, Deferred Payment Offer Payment Records, in October of each year and all Forms 6313, Collateral Agreement Payment Records, in May of each year for forwarding to DOJ.
When the taxpayer fails to comply with the terms of the agreement, CSCO will send copies of the letters sent to the taxpayer and Form 6314 or Form 6313 to Advisory along with a request that DOJ be advised of the default.
When the terms of the settlement agreement have been fulfilled, CSCO will take actions to close out the case, including requesting the release of Notices of Federal Tax Lien, abating any remaining liability, and advising the originating Advisory unit. See IRM 184.108.40.206.19.2, Closing DOJ Settlements.
If it is determined that the judgment debtor has relocated to another state or federal judicial district, the advisor assigned to the case will take the follow actions:
IF THEN DOJ has not referred the judgment back to the IRS for collection, the advisor will notify the appropriate DOJ FLU of the judgment debtor's change of address There is a deferred payment or collateral agreement being monitored by CSCO, the advisor will notify CSCO of the debtor's change of address 1) DOJ has referred the judgment back to the IRS for collection,
2) the case is not being monitored by CSCO,
3) TC 550 and TC 521 inputs have posted, and
4) a complete investigation of all known assets in the district where judgment was entered has been completed and any collection actions have been taken,
the advisor will transfer the judgment case to the appropriate Advisory office where the judgment debtor has relocated.
If the judgment debtor owns or acquires real property in the new location, the DOJ office that obtained the judgment (Tax Division or local U.S. Attorney's office) should be requested to file a certified copy of the abstract of judgment in the appropriate location where the real property is located. See IRM 220.127.116.11.2, Effect of Judgment on Collection Statute of Limitations, for further information regarding the creation of a judgment lien against real property.
Cases in which judgments have been entered will not be closed or declared currently not collectible if the Department of Justice (DOJ) has not closed their case and transferred jurisdiction back to the IRS. Periodic follow-ups must be made by Advisory with the appropriate Financial Litigation Unit (at a minimum of every 12 months) to determine if DOJ collection efforts have been exhausted.
As long as there is potential for collecting an unassessable judgment through tax refund offsets, the case should remain open in Advisory to take appropriate steps to ensure that any individual tax refunds of those named in the judgment are offset to the unassessable judgment.
When a judgment case for assessed tax liabilities is closed by DOJ and transferred back to the IRS, use the following procedures:
IF THEN There is current collection potential
Input TC 521 if there is an unreversed TC 520, and TC 531 if there is an unreversed TC 530.
Forward any useful information to the revenue officer who will receive the BAL DUE.
Close the ICS case.
There is no current collection potential
Input TC 521 if there is an unreversed TC 520, and TC 530 with the appropriate closing code.
Close the ICS case.
The Records Control Schedule (RSC) for Collection is located in IRM 1.15.28. The RSC provides mandatory instructions for retaining and disposing of records no longer needed for current business.
Active judgment files should be retained by Advisory until they become inactive. See Exhibit 1.15.28-1, Item 53(a). A judgment file remains active as long as there is an open Advisory ICS judgment control module.
After the related ICS judgment control is closed, a judgment is considered inactive. Inactive judgment files should be retained by Advisory for three years after being placed in inactive status, and thereafter retired to the Federal Records Center. For information on retiring records to the Federal Records Center, see IRM 18.104.22.168, Authority to Retire IRS Records.
In cases where the judgment has been fully satisfied, the judgment file should be destroyed two years after the judgment is satisfied. See IRM Exhibit 1.15.28-1, Records Control Schedule for Collection, Item 53(c), Satisfied Judgment Files.