- 4.15.1 Jeopardy and Terminations
- 220.127.116.11 Overview
- 18.104.22.168 Use
- 22.214.171.124 Approval
- 126.96.36.199 Definitions
- 188.8.131.52.1 Jeopardy Assessment
- 184.108.40.206.2 Termination Assessment
- 220.127.116.11.3 Possessor of Cash Assessment
- 18.104.22.168 Responsibility
- 22.214.171.124.1 Examination
- 126.96.36.199.2 Collection
- 188.8.131.52.3 Criminal Investigation
- 184.108.40.206.4 TE/GE
- 220.127.116.11.5 Appeals
- 18.104.22.168.6 Other
- 22.214.171.124 Conditions
- 126.96.36.199 Potential Criminal Case
Part 4. Examining Process
Chapter 15. Jeopardy/Termination Assessments
Section 1. Jeopardy and Terminations
May 12, 2014
(1) This transmits revised IRM 4.15.1, Jeopardy/Termination Assessments, Jeopardy and Terminations.
This IRM provides examiners with information and guidance on the Jeopardy/Termination Assessments program.
(1) Editorial changes were made to this IRM to edit grammar and update references.
(2) Since Chief Counsel Notice SB 2009-43 was included in a Chief Counsel Decision Memorandum (CCDM) replaced Chief Counsel Notice SB 2009-43 with a reference to CCDM 188.8.131.52.3.1, Subject Matter Responsibility and Functions
,Director, Examination Policy
This section provides an overview of the purpose of the jeopardy and termination provisions of the Internal Revenue Code (IRC). Jeopardy assessments give the Commissioner specific authority to take immediate assessment and collection action in situations where it is determined that collection of tax will be endangered if regular assessment and collection procedures are followed.
This text provides guidelines on the use, approval, definition, and conditions of a jeopardy or termination (jeopardy/termination) assessment, who is responsible for recommending a jeopardy/termination, and balancing the criminal and civil aspects when there is a potential criminal case.
Jeopardy/termination assessments of tax are to be used sparingly. They are to be reasonable, appropriate, and limited to amounts which can be expected to protect the government.
All jeopardy/termination assessments have a common characteristic: prior to assessment, a determination is made that collection will be endangered if regular assessment and collection procedures are followed.
The mere fact that a taxpayer is the subject of a special fraud investigation is not sufficient grounds for a jeopardy/termination assessment. When it is determined that a taxpayer has little or no assets to offset the assessment, jeopardy/termination assessments will generally not be pursued.
Each jeopardy/termination assessment must receive the personal approval of the Area Director. Policy Statement 4-88, IRM 184.108.40.206.27, and Policy Statement 4-89, IRM 220.127.116.11.28, Delegation Order No. 4–21 (Formerly 219), IRM Exhibit 1.22-1, Delegation Orders by Process, as revised. In addition, the IRS Restructuring and Reform Act of 1998 requires written approval by Chief Counsel (or such delegate).
In any case which might cause serious inconvenience to the general public, the Director, Examination must be notified. If necessary, the Director, Examination will notify the Commissioner, Small Business Self-Employed (SB/SE). Examples of such cases include those involving banks, newspapers, insurance companies, hospitals, and public utility companies.
The Area Director may request advice in any jeopardy/termination assessment situation from the field, Counsel, or another function.
The Area Director must exclude himself or herself from personal involvement in cases in the following situations:
He or she has had access to grand jury information.
He or she has reasonable cause.
He or she would be restricted by the rules of conduct applicable to government, executive branch and Treasury employees.
He or she has a conflict of interest as noted in Delegation Order 4–21.
If the Area Director has excluded himself or herself from personal involvement, the following officials are delegated the authority to personally approve a jeopardy/termination in the order prescribed below:
Field Territory Manager
Special Agent In Charge, Criminal Investigation
Director, Employee Plans
Director, Exempt Organizations
The authority of the Chief Counsel to approve a jeopardy/termination has been delegated to Associate Area Counsel. Contact Counsel for assistance in obtaining written approval. See Chief Counsel Decision Memorandum (CCDM) 18.104.22.168.3.1, Subject Matter Responsibility and Functions.
A jeopardy/termination assessment is defined as a jeopardy, termination, possessor of cash jeopardy, or possessor of cash termination assessment.
If the assessment or collection of a deficiency will be jeopardized by delay, the deficiency is immediately assessed. The deficiency includes additional amounts, additions to tax, and interest. The assessment is made for a PRIOR YEAR where the filing date, including extensions, has passed. The legal authority for jeopardy assessments are as follows:
IRC 6861 for income, estate, gift, and certain excise taxes.
IRC 6862 for taxes other than income, estate, gift, and certain excise taxes.
If the assessment or collection of a deficiency will be jeopardized by delay, the deficiency is immediately assessed. The deficiency may include additional amounts, additions to tax, and interest. The deficiency may be computed for a short period or the entire year. The assessment is made for the CURRENT YEAR or the preceding year if the filing date, including extensions, has not passed. The legal authority for termination assessments are as follows:
IRC 6851 for income tax.
IRC 6867 for "Possessor of Cash"
If an individual, in physical possession of cash or its equivalent in excess of $10,000, does not claim the cash as his or hers or as belonging to another person who can be easily identified and who acknowledges ownership of the cash, for the purposes of IRC 6851 and IRC 6861, it is presumed that:
The cash represents gross income of a single individual for the taxable year in which the possession occurs; and
The collection of tax is presumed to be jeopardized by delay.
All territory functions should be alert for conditions where a jeopardy/termination assessment may be necessary to protect the government's interest.
Examination is responsible for recommending jeopardy/termination assessments in cases under their active consideration.
Appeals may forward a report to Examination, on a case pending before Appeals, for Examination to determine if a jeopardy/termination situation exists. Examination will limit its investigation to a determination that collection of the currently proposed deficiency will be endangered if regular assessment and collection procedures are followed. Appeals is responsible for making the final determination of the tax liability.
Collection is responsible for recommending jeopardy/termination assessments in any case in which collection of the tax would be jeopardized by delay, except those cases under active consideration by Examination, Criminal Investigation (CI) or Tax Exempt and Governmental Entities (TE/GE).
If Collection receives information on cases under active consideration by another territory function, the field territory manager should report such information by memorandum to the affected territory function.
CI is responsible for recommending jeopardy/termination assessments in cases under active consideration or joint active consideration by Cl and Examination, CI and Collection, or CI and TE/GE.
If CI receives information on cases under active consideration by another territory function, the CI special agent in charge should report such information by memorandum to the affected territory function.
TE/GE is responsible for recommending jeopardy/termination assessments in cases under active consideration by TE/GE.
If TE/GE receives information on cases under active consideration by another territory function, the Director, Employee Plans or Director, Indian Tribal Governments (ITG) should report such information by memorandum to the affected territory function.
Appeals will forward a report to Examination or TE/GE, as applicable, if during an Appeals consideration of a case, it is determined that a jeopardy/termination may be advisable. Examination or TE/GE is responsible for recommending the jeopardy/termination assessment.
Appeals is responsible for making the final determination of the tax liability.
A jeopardy/termination assessment will be made if collection is determined to be in jeopardy because one or more of the following conditions exists.
The taxpayer is, or appears to be, designing quickly to depart from the United States or to conceal himself or herself.
The taxpayer is, or appears to be, designing quickly to place his or her or its property (including retirement plan assets) beyond the reach of the government by removing it from the United States, concealing it, dissipating it, and/or transferring it to other persons.
The taxpayer's financial solvency is, or appears to be, imperiled. (This does not include investigations where the taxpayer becomes insolvent by virtue of the accrual of the proposed assessment of tax, penalty, and interest.)
The taxpayer has in his or her possession more than $10,000 in cash or its equivalent, denies the ownership of such cash, and refuses to identify the owner of such cash.
After the referral of a case to CI or during a joint investigation, it shall be the continued responsibility of Examination and Cl to make periodic reviews of the facts and circumstances involved in the case to assure that the government's interests are adequately protected. See Policy Statement 4-26 (Formerly 4-84), IRM 22.214.171.124.11 (6).
Jeopardy/termination assessments will be withheld in potential criminal tax investigations to the extent necessary to avoid imperiling successful investigation or prosecution of such criminal investigations. On the other hand, when such action is warranted in those investigations, it must be taken whenever it is feasible to do so.
Contact Cl if a jeopardy/termination assessment is being considered on a case that has potential for a criminal tax investigation or that may affect pending prosecution investigations.
Criminal Investigation Opinion—If the taxpayer is under criminal investigation, contact CI to determine whether to proceed with the civil aspect. If agreement cannot be reached with Cl, the opinion of Counsel will be obtained.
Counsel Opinion—If there is doubt as to whether a proposed civil action would imperil prosecution, the opinion of Counsel will be obtained.
If CI, Examination, and their respective Counsel cannot reach agreement, resolution will be by elevation to the next level of management as described in Policy Statement 4–26 (formerly 4-84), see IRM 126.96.36.199.11 (6).
Generally, there should be no suspension of collection action on assessed amounts of tax liabilities reported on filed returns.