4.15.1 Jeopardy and Terminations

Manual Transmittal

June 11, 2018

Purpose

(1) This transmits revised IRM 4.15.1, Jeopardy/Termination Assessments, Jeopardy and Terminations.

Material Changes

(1) Editorial changes were made to this IRM to edit grammar and update references.

(2) Expanded to include the requirements of IRM 1.11.2.2.5, Address Management and Internal Controls.

(3) IRM 4.15.1.3.2- Updated to include an exception if the Area Director is listed on the 6(e) Grand Jury Access List.

(4) IRM 4.15.1.3.3- Updated the delegations of authority.

(5) IRM 4.15.1.4.1- (1) Updated to include referrals from outside agencies. (2) Defining referrals from Appeals and Exam’s responsibilities.

(6) IRM 4.15.1.4.5 - Updated to include active control of Appeals cases and point to IRM 8.7.1.6.3, Jeopardy Assessments on Cases Pending in Appeals for additional information.

(7) IRM 4.15.1.5 - Updated to reference IRM 5.17.15.2.1, Grounds for Jeopardy Assessments.

(8) IRM 4.15.1.6.1 - Updated to include cautionary statement, civil enforcement action may affect criminal proceedings if the same type of tax and the same periods are affected.

(9) IRM 4.15.1.6.2 - Updated to the requirement of CI and the Civil functions meeting at least quarterly.

Effect on Other Documents

This material supersedes IRM 4.15.1, dated May 12, 2014.

Audience

Small Business and Self-Employed (SB/SE), Tax Exempt and Government Entities (TE/GE), Large Business and International (LB&I), Appeals employees.

Effective Date

(06-11-2018)

Michael W. Damasiewicz
Director, Examination - Field and Campus Policy
SE:S:E:HQ:EFCP
Small Business/Self Employed

Program Scope and Objectives

  1. Purpose. This IRM provides examiners with information and guidance on the Jeopardy/Termination Assessments program.

  2. Audience. These procedures apply to Small Business and Self-Employed (SB/SE), Tax Exempt and Government Entities (TE/GE), Large Business and International (LB&I), Appeals employees.

  3. Policy Owner. The Director, Examination - Field and Campus Policy, which is under the Director, Headquarters Examination.

  4. IRM Owner. Field Examination Special Processes (FESP), which is under the Director, Examination - Field and Campus Policy.

  5. Primary Stakeholders. Stakeholders include SB/SE Technical Services, SB/SE Collection, Appeals and Criminal Investigation.

  6. Contact Information. To recommend changes or make any other suggestions related to this IRM section, see IRM 1.11.6.6, Providing Feedback About an IRM Section Outside of Clearance.

  7. Program Goals. The goal of this section is to provide an overview of 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.

Background

  1. This IRM provides examiners with information and guidance on the Jeopardy/Termination Assessments program. 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.

Authority

  1. By law, the Internal Revenue Service has the authority to conduct examinations under Title 26, Internal Revenue Code, Subtitle F - Procedures and Administration, Chapter 78, Discovery of Liability and Enforcement of Title, Subchapter A, Examination and Inspection, which includes, but is not limited to, the following IRC sections:

    • IRC 6201, Assessment authority.

    • IRC 6851, Termination assessments of income tax.

    • IRC 6852, Termination assessments in case of flagrant political expenditures of section 501(c)(3) organizations.

    • IRC 6861, Jeopardy assessments of income, estate, gift and certain excise taxes.

    • IRC 6862, Jeopardy assessments of taxes other than income, estate, gift, and certain excise taxes.

    • IRC 6867, Presumptions where owner of large amount of cash is not identified.

    • IRC 7602, Examination of books and witnesses.

    Note:

    Additional authority for conducting examinations is contained in the 26 CFR 601.105, Statement of Procedural Regulations.

Roles and Responsibilities

  1. The Director, Headquarters Examination, is the executive responsible for providing policy and guidance for field employees and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.3.5, Headquarters Examination, for additional information.

  2. The Director, Examination - Field and Campus Policy (formerly known as the Director, Examination AUR/Policy), reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.16.3.5.1, Exam/AUR Policy, for additional information.

  3. Field Examination Special Processes (FESP), which is under the Director, Examination - Field and Campus Policy, is the group responsible for providing oversight and policy and procedural guidance on specialized examination processes to SB/SE field examiners and managers. See IRM 1.1.16.3.5.1.2, Examination Field Special Processes.

Program Management and Review

  1. Periodic program reviews are conducted by FESP to:

    • Assess the effectiveness of specific programs within Examination or across the organization,

    • Determine if procedures are being followed,

    • Validate policies and procedures and

    • Identify and share best/proven practices.

Acronyms

  1. The following table lists commonly used acronyms:

    Acronym Definition
    BOD Business Operating Division
    CCDM Chief Counsel Directives Manual
    CI Criminal Investigation
    FESP Field Exam Special Processes
    LB&I Large Business and International
    IRC Internal Revenue Code
    ITG Indian Tribal Governments
    TE/GE Tax Exempt and Governmental Entities

Terms

  1. The following table lists commonly used terms and associated definitions:

    Term Definition
    Jeopardy/Termination Assessment A jeopardy/termination assessment is defined as jeopardy, termination, possessor of cash jeopardy, or possessor of cash termination assessment.
    Jeopardy 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 authorities for jeopardy assessments are as follows:
    1. IRC 6861, Jeopardy assessments of income, estate, gift, and certain excise taxes.

    2. IRC 6862, Jeopardy assessment of taxes other than income, estate, gift, and certain excise taxes.

    Termination Assessment 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 authorities for termination assessments are as follows:
    1. IRC 6851, Termination assessments of income tax.

    2. IRC 6867, Presumptions where owner of large amount of cash is not identified.

    Possessor of Cash Assessment 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, Termination assessments of income tax and IRC 6861, Jeopardy assessments of income, estate, gift, and certain excise taxes, it is presumed that:
    1. The cash represents gross income of a single individual for the taxable year in which the possession occurs; and

    2. The collection of tax is presumed to be jeopardized by delay. See IRM 5.17.15.3, Presumption Regarding $10,000 in Unclaimed Cash.

Related Resources

  1. The following table contains related resources referenced in this IRM:

    Resources Title
    IRM 1.2.13.1.11 Policy Statement 4-26, (Formerly P-4-84)
    IRM 1.2.13.1.27 Policy Statement 4-88
    IRM 1.2.13.1.28 Policy Statement 4-89
    IRM 1.2.43.19 Delegation Order No. 4–21, (Formerly 219)
    IRM 5.17.15.2.1 Grounds for Jeopardy Assessments
    IRM 5.17.15.3 Presumption Regarding $10,000 in Unclaimed Cash
    IRM 8.7.1.6.3 Jeopardy Assessments On Cases Pending in Appeals
    CCDM 30.3.2.4.3.1 Subject Matter Responsibility and Functions

Use of Jeopardy/Termination Assessments

  1. 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.

  2. 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.

  3. 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.

Approval

  1. Each jeopardy/termination assessment must receive the personal approval of the Area Director. Policy Statement 4-88, IRM 1.2.13.1.27, and Policy Statement 4-89, IRM 1.2.13.1.28, Delegation Order No. 4–21 (Formerly 219). In addition, written approval by Chief Counsel (or such delegate) is required.

Prior Headquarters Office Notification

  1. 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 of the respective business operating division (BOD). Examples of such cases include those involving banks, newspapers, insurance companies, hospitals, and public utility companies.

  2. The Area Director may request advice in any jeopardy/termination assessment situation from the field, Counsel, or another function.

Exclusions

  1. The Area Director must exclude himself or herself from personal involvement in cases in the following situations:

    1. He or she has had access to grand jury information, or is listed on the 6(e) Grand Jury List.

    2. He or she has reasonable cause.

    3. He or she would be restricted by the rules of conduct applicable to government, executive branch and Treasury employees.

    4. He or she has a conflict of interest.

Order of Approval

  1. 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 assessment in the order prescribed below:

    1. Director, Field Examination, (SB/SE)

    2. Director of Field Operations, Criminal Investigation

    3. Director, Employee Plans

    4. Director, Exempt Organizations

  2. 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 Directives Manual (CCDM) 30.3.2.4.3.1, Subject Matter Responsibility and Functions.

Responsibility

  1. All territory functions should be alert for conditions where a jeopardy/termination assessment may be necessary to protect the government's interest.

Examination

  1. Examination is responsible for recommending jeopardy/termination assessments in cases under their active consideration and referrals from outside agencies.

  2. 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

  1. 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).

  2. 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.

Criminal Investigation

  1. 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.

  2. 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

  1. TE/GE is responsible for recommending jeopardy/termination assessments in cases under active consideration by TE/GE.

  2. 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

  1. 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.

  2. Appeals is responsible for determining the final tax liability if the liability case is under Appeals’ jurisdiction at the time of the jeopardy/termination recommendation. See IRM 8.7.1.6.3, Jeopardy Assessments on Cases Pending in Appeals.

Other

  1. Any other function discovering or receiving information indicating the possible existence of a situation requiring a jeopardy/termination assessment should report such information by memorandum to the affected territory function.

Conditions

  1. A jeopardy/termination assessment will be made if collection is determined to be in jeopardy because one or more of the following conditions exists:

    1. The taxpayer is, or appears to be, designing quickly to depart from the United States or to conceal himself or herself.

    2. 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.

    3. 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.)

    4. 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.

    5. For additional information see IRM 5.17.15.2.1, Grounds for Jeopardy Assessments.

Potential Criminal Case

  1. 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 IRM 1.2.13.1.11 (6), Policy Statement 4-26 (Formerly 4-84).

Criminal Enforcement

  1. 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. Civil enforcement actions with respect to the same taxable periods and same types of taxes for those periods included in the criminal investigation may imperil subsequent prosecution. On the other hand, when such action is warranted in those investigations, it must be taken whenever it is feasible to do so.

  2. 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.

Civil Enforcement

  1. Criminal Investigation Opinion—If the taxpayer is under criminal investigation, contact CI to determine whether to proceed with the civil aspect.

  2. If CI agrees civil enforcement actions can proceed without impeding the criminal aspect of the case, the responsible civil function will coordinate meetings with CI to be held at least quarterly.

  3. Counsel Opinion—If there is doubt as to whether a proposed civil action would imperil prosecution, CI and Examination will obtain the opinion of their respective Counsel.

  4. If CI, Examination, and their respective Counsel cannot reach agreement, resolution will be by elevation to the next level of management as described in IRM 1.2.13.1.11 (6), Policy Statement 4–26 (formerly 4-84).

  5. Generally, there should be no suspension of collection action on assessed amounts of tax liabilities reported on filed returns.