- 5.1.4 Jeopardy, Termination, Quick and Prompt Assessments
- 126.96.36.199 Overview
- 188.8.131.52 Jeopardy and Termination Assessment Overview
- 184.108.40.206 Jeopardy Assessments, Pre-Assessments
- 220.127.116.11.1 Approval Prior to Jeopardy Assessment
- 18.104.22.168.2 Termination Pre-Assessment Recommendations
- 22.214.171.124.3 Responsibility of Territory Manager
- 126.96.36.199.4 Assessment and Post Assessment Procedures
- 188.8.131.52.5 Liaison
- 184.108.40.206.6 Administrative/Judicial Review of Jeopardy/Termination Assessments
- 220.127.116.11.7 Processing Abatements
- 18.104.22.168 Quick Assessment
- 22.214.171.124 Prompt Assessments
- 126.96.36.199 Quick and Prompt Assessments on Trust Fund Recovery Penalty
- 188.8.131.52 Processing Quick and Prompt Assessments
- 184.108.40.206 Form 3552, Prompt Assessment Billing Assembly
- 220.127.116.11 Mathematical Errors
- Exhibit 5.1.4-1 Pattern Letter P513 (Rev. 92008) (Reference: IRM 18.104.22.168.4)
Part 5. Collecting Process
Chapter 1. Field Collecting Procedures
Section 4. Jeopardy, Termination, Quick and Prompt Assessments
July 31, 2014
(1) This transmits revised IRM 5.1.4, Jeopardy, Termination, Quick and Prompt Assessments.
(1) Reviewed and updated the IRM where necessary for editorial changes including IRM references and organizational titles.
Rocco A. Steco
Acting Director, Collection Policy
This section provides direction to personnel in Field Collection and Advisory for the identification and processing of accelerated assessments.
Accelerated assessments are collection actions that expedite the normal assessment process. Collection personnel should be alert for situations where the use of accelerated assessments is appropriate. These tools are employed when:
The collection of the tax is at risk, or
The assessment statute expiration date (ASED) is imminent.
There are four types of accelerated assessments:
Jeopardy assessments - initiated when collection of the tax is in danger and the tax is due, but there is not a voluntarily filed return or an IRC 6020(b) return has been prepared by the Service.
Termination assessments - initiated by Examination and used to assess income tax immediately because waiting until the end of the tax year would jeopardize collection.
Quick assessments - initiated when the collection of the tax is not in danger but the assessment statute expiration date (ASED) is within 90 days.
Prompt assessments - initiated when there is a secured or processable return or a trust fund recovery penalty and the tax should be assessed immediately.
These four types of assessments accelerate the assessment of the tax only. They do not eliminate or accelerate the due process or other legal requirements that collection personnel must follow. By accelerating the assessment, IRS can proceed with due process sooner.
Jeopardy assessments are initiated when it is determined that collection of taxes will be endangered if regular assessment and collection procedures are followed and there is neither a voluntarily filed return nor an IRC 6020(b) return prepared by the Service.
Relevant Internal Revenue Code (IRC) sections concerning jeopardy assessments are:
IRC 6861 authorizes assessment where the due date for filing of a return has expired and applies to jeopardy assessments of income, estate, gift and certain excise taxes.
IRC 6862 applies to taxes other than income, estate, gift and certain excise taxes, that is, employment and other excise taxes whether or not the due date for filing and paying such tax has expired.
IRC 6867 authorizes a jeopardy assessment in situations where an individual is in possession of cash, in excess of $10,000, and does not claim ownership or who claims the cash belongs to another individual, whose identity can be determined, and who claims ownership of the cash.
All jeopardy assessments must be in full compliance with Policy Statement 4-88 found in IRM 22.214.171.124.27 which provides:
That jeopardy assessments are to be used sparingly,
Criteria under which jeopardy assessments will be made,
Criteria when National office approval is required,
A process to comply with a taxpayer request for administrative review, and
That jeopardy assessments involving alcohol, tobacco and firearms be closely coordinated with, and initiated at the request of, the Bureau of Alcohol, Tobacco and Firearms.
Jeopardy assessments should be used prudently and care taken to avoid excess and unreasonable assessments. The amount of the assessment should be limited to an amount that can reasonably be expected to equal the liability due.
Termination assessments are very similar to jeopardy assessments except that, under the provisions of IRC 6851, they are made only for the current or immediately preceding taxable year and can be made at any time prior to the due date for filing those years' returns.
A termination assessment is initiated by Examination.
It is used to assess income taxes immediately because waiting until the end of the tax year would jeopardize collection.
Termination assessment of income tax, IRC 6851, including terminations under the conditions described in IRC 6867, applies when the taxable year of a taxpayer has not ended or when the taxable year has ended but the due date, determined with respect to extensions, for filing the return has not arrived.
All termination assessments must be in full compliance with Policy Statement 4-89, found in IRM 126.96.36.199.28, which provides:
That termination assessments are to be used sparingly and be a reasonable amount,
Criteria under which termination assessments will be made,
Criteria when National office approval is required, and
A process to comply with a taxpayer request for administrative review.
A potential jeopardy or termination assessment may develop as the result of information received from a confidential informant. The source of the information must not be divulged to the taxpayer or other unauthorized personnel.
For a more thorough discussion of jeopardy and termination assessments and criteria to consider before taking jeopardy collection actions, see IRM 5.17.15, Termination and Jeopardy Assessments and Jeopardy Collection and IRM 5.11.3, Jeopardy Levy without a Jeopardy Assessment.
Jeopardy assessments initiated by Collection personnel are limited to:
Trust Fund Recovery Penalty (TFRP) assessments, see IRM 188.8.131.52,Quick and Prompt Assessment Action,
Employment and excise tax assessments, whether or not the return due date has passed,
Partnership penalty assessments,
Income tax assessments when there is no question as to the amount of the liability.
A jeopardy assessment is requested when:
A determination is made that collection is in jeopardy.
One or more of the four conditions outlined in Policy Statement 4–88 are present.
TFRP assessments and IRC 6020(b) assessments for which appropriate appeal/protest periods have not expired.
Assessment/collection action is being proposed prior to the return due date for a signed return for income tax liabilities.
Refer to Examination information that could lead to a jeopardy assessment of a proposed transferee liability, disputed additional income taxes, or any other tax liability.
Prepare Form 2644, Recommendation for Jeopardy/Termination Assessment, for all jeopardy assessments and Form 2859, Request for Quick or Prompt Assessment, for quick or prompt assessments. Form 2859 includes a chart of all required items to be completed for each type of return.
Attach a report setting forth the conditions and factors in support of the recommendation including:
Name, address, and taxpayer identification number (TIN),
Tax, penalty and interest to be assessed by period,
Nature of the taxpayer's business or activity,
Taxpayer's present financial condition,
Information regarding the taxpayer's activity giving rise to the recommendation, such as transfer of assets without consideration,
Records or statements with respect to continuing business or personal losses,
Filing record of taxpayer,
Taxpayer’s record of delayed payment of taxes in the past (collection delays and unpaid taxes),
Nature and location of the taxpayer’s assets and the source(s) of income,
Statement as to the factual basis for the determination of taxable income and a schedule showing how the tax was computed,
Other information having a bearing upon the taxpayer’s financial condition, future anticipation of losses, etc.
Due to the urgency involved in jeopardy assessments, the file will be given the highest priority of handling within and between the responsible functions.
Refer to Delegation Order 4-21 (Rev. 1) (formerly DO 219, Rev. 4) for delegated authority to make jeopardy assessments, see IRM 184.108.40.206.
Per IRC 7429(a)(1)(A), Chief Counsel, or his or her delegate, must approve all jeopardy assessments and all jeopardy levies. This authority can be re-delegated no lower than Associate Area Counsel.
Obtain Counsel's signature on Form 2644, Recommendation for Jeopardy/Termination Assessment. Approval via fax is acceptable.
Collection personnel will not initiate termination assessment recommendations.
Refer information that could lead to a termination assessment to Examination for appropriate action.
Prior to approval by the Area Director, the Collection Territory Manager will:
Review all termination and jeopardy assessment recommendations, including those initiated by Examination and Criminal Investigation,
Discuss disputed cases with the originating division,
Document and report unresolved issues to the Area Director, who has final responsibility for determining that collection of the proposed tax liability is in jeopardy.
Immediately after the Area Director has approved the jeopardy or termination assessment, the tax will be assessed by faxing Forms 2644 and 2859 to the Campus Accounting Function. See SERP, Who/Where, Prompt, Quick, Jeopardy and Termination Assessments for the fax number at http://serp.enterprise.irs.gov/databases/who-where.dr/prompt_asses.htm. Fax the forms to the campus where the return would normally be filed. Accounting and Tax Payment Branch in Submission Processing will ensure the fax numbers on SERP are correct.
Input TC 570 as a secondary transaction when posting payments to avoid the possibility of erroneously refunding credits.
Form 3552, Prompt Assessment Billing Assembly (Parts 3 and 4), may be completed and used to provide Notice and Demand. On Parts 3 and 4 of Form 3552:
Change the statement in the second sentence from "when you receive this notice" to "immediately. "
Delete the last portion of the third sentence which states, "and send it with a copy of this notice to the address shown above."
Delete the statement, "Please return this copy with your payment to the address shown above" from the bottom of this form.
In accordance with IRC 7429(a)(1)(B), after the tax is assessed, a taxpayer must be provided, within 5 calendar days of assessment, the following:
Notice and Demand to pay the tax (Form 3552),
Notice of Jeopardy or Termination Assessment, including notification of right of appeal and right of review under IRC 7429 and, in the case of levy, IRC 6330 (See Exhibit 5.1.4–1, Pattern Letter P–513, Notice of Jeopardy Assessment Right of Appeal and Letter 2439 (CG) or Letter 2439-A (CG), Notice of Jeopardy Levy and Right of Appeal),
Computation of income and tax,
For jeopardy and termination assessments under the circumstances described in IRC 6867, individuals found in possession of cash or cash equivalent in excess of $10,000, who do not claim ownership, will be notified that they are not entitled to judicial review under IRC 7429 and no notice of right of appeal is provided (see IRC 6867(b)(3)); however, a termination or jeopardy assessment under IRC 6867 is appealable to Appeals.
Personally deliver notices when possible.
If the taxpayer … Then … Cannot be located Send the notices by certified mail to the last known address of the taxpayer. No longer resides at the address on the assessment Check IDRS for a new address.
Review the jeopardy or termination file for the taxpayer's current residence.
Determine whether to file a Notice of Federal Tax Lien (NFTL).
If … Then … The taxpayer does not full pay the amount of the assessment upon issuance of the Notice and Demand File a Notice of Federal Tax Lien through the Automated Lien System (ALS). It is determined that the filing of the lien will not ensure that the taxpayer will not dispose of, dissipate, or hide personal property Take immediate action to levy on cash or other liquid assets of the taxpayer in the possession of third parties. See IRM 220.127.116.11 for the forms and letters to be used for the jeopardy levy.
IRC 6851 and IRC 6867 provide for the assessment (termination) and collection of tax associated with cash amounts in excess of $10,000 when the cash or cash equivalent has been seized by law enforcement authorities and the owner cannot be identified. Collection of these assessments comes from the cash itself not from the personal assets of the person in possession of the cash.
Effective administration of jeopardy and termination assessment procedures requires the close cooperation of all involved Service personnel.
Advisory has overall responsibility for liaison between Collection and:
SB/SE Area Counsel
Advisory will open the appropriate NFOI 186 in ICS no later than 7 calendar days of receipt of the triggering request or documents for any necessary actions related to accelerated assessments. Due to the time sensitive nature of the jeopardy/termination assessment and/or administrative/judicial review process, control and recordation of the case actions in ICS will necessitate loading the case well within the outside timeframe of 7 calendar days.
IRC 7429 provides that the taxpayer is entitled to administrative and judicial review of jeopardy and termination assessments.
Administrative and judicial review provisions do not apply to jeopardy or termination assessments made under IRC 6867 (large cash possession). See IRM 18.104.22.168.4
Within 1 workday of receipt of the written request, Advisory will advise the appropriate Service personnel and provide the entire case file, including the written request, to:
Appeals, in the case of a request for an administrative review, or
SB/SE Area Counsel, in the case of a request for judicial review.
Responsible Service employees should keep Advisory informed of the status of the case.
If … Then Advisory will… The taxpayer files a civil suit at any time prior to conclusion of the administrative appeals Request the entire Collection and/or Examination file for transmission to SB/SE Area Counsel. An individual comes forward and claims ownership of cash (or cash equivalent) previously assessed under IRC 6867 Advise the individual to submit a written request, signed under the penalties of perjury, to the Area Director marked to the attention of the Advisory manager. The written request will include the following: a. The name, address, and social security number of the person submitting the request, b. A detailed description of the property levied upon, if other than cash; if cash, state the exact amount seized, c. A description of the claimant’s basis for claiming the property levied upon as belonging to the claimant, d. The name and address of the "Possessor" of the cash or cash equivalent (the person who was originally found to be in possession of the cash and who denied its ownership and did not properly identify the true owner), e. The originating Internal Revenue area, the date of lien or levy as shown on the Notice of Tax Lien (Form 668(Y) (C)), Notice of Levy (Form 668–A) or Levy (Form 668–B) or, in lieu thereof, a statement of the reasons why such information cannot be furnished. If... Then... The ownership claim is submitted under conditions above and is disallowed Advisory should notify the claimant as soon as possible of the right to bring suit against the government under provisions of IRC 7426 or for an administrative appeal with the Appeals Office. Advisory determines that the ownership claim is valid Refer the claim to Examination for consideration. Examination is responsible for abating any over-assessment and refunding the over-assessment to the claimant if applicable. Examination will notify Collection of their determination so that Advisory can arrange for disposition of any non-cash items seized. There is any litigation filed against the government because of a jeopardy assessment made under IRC 6867, Advisory will notify Examination and furnish a copy of the third party's claim unless previously furnished.
The responsibility to keep Advisory informed of the status of the case should not violate any ex parte prohibitions. Specifically, Appeals should communicate with the Advisory regarding the anticipated return of the case. See Rev. Proc. 2000-43 for a more thorough discussion of ex parte communications and prohibitions.
See IRM 4.15.4, Administrative and Judicial Review, for a more thorough discussion of the administrative and judicial review process.
Under the administrative/judicial review process, a determination may be made that the assessment was improperly made or the tax was excessive in amount. When this occurs, Advisory is responsible for coordinating the abatement of jeopardy/termination assessments.
Collection personnel will prepare Form 3870, Request for Adjustment, to decrease tax, penalty and interest as determined by Appeals or District Court.
Final District Court orders to abate all, or a part, of the tax should be provided to Advisory by SB/SE Area Counsel. Within 14 calendar days of receipt of such orders, Advisory will return any files to the initiating office for immediate processing of the abatement. See IRM 22.214.171.124.1.4, Abating Jeopardy/Termination Assessments, for instructions on processing the abatement request.
When the District Court order is based on a determination that the collection of the tax was not in jeopardy, Examination will reestablish the taxpayer’s filing requirement and ensure examination of the taxpayer’s current year return.
Quick assessment procedures are required when the tax is not at risk, but the assessment statute will expire within 90 days and is limited to the following situations:
Additional taxes and agreed deficiencies when the statutory period for assessment will expire before assessment action can be completed under regular procedures.
Deficiencies or current additional and delinquent taxes where receivership/probate proceedings are involved or imminent (per IRC 6871).
A quick assessment:
Does not provide authority to make immediate demand for payment of the tax liability assessed.
Does allow the taxpayer the statutory 10-day period in which to pay and the 30-day notice of intent to levy period under IRC 6331(d) and notice of a right to a hearing under IRC 6330(a).
Does not change/update the existing Master File entity information.
To eliminate unpostable conditions, research a transcript of the module involved, if practical, to determine if:
Module is established on Masterfile,
TIN and name line agree with the Form 2859, Request for Quick or Prompt Assessment, information,
Tax period was not previously assessed,
No freeze codes exist,
Proper transaction codes are being input and are not duplications,
Taxpayer is in bankruptcy.
A prompt assessment is a manually processed assessment of a secured and processable return when collection of the resulting tax appears to be at risk and the intention is to proceed with collection action immediately following the 10 day period for Notice and Demand.
A prompt assessment of employment, excise, and partnership tax returns prepared and signed under authority of IRC 6020(b) may be requested provided that Letter 1085(DO), 30 Day Letter, Proposed IRC 6020(b) Assessment, or Letter 1616(DO), 30 Day Letter, Proposed IRC 6020(b) Assessment Partnership Return, has been sent to the taxpayer and the appeal period has lapsed.
The initiator must always determine prior to the recommendation:
If the taxpayer is . . . Then . . . In bankruptcy Contact Insolvency prior to initiating a prompt assessment. Quickly placing property beyond the reach of the government Collection action may be pursued although the 10-day notice and demand period and the 30-day notice of intent to levy has not expired. Refer to IRM 5.11.3, Jeopardy Levy Without a Jeopardy Assessment. An in-business taxpayer Do not do a prompt assessment where the proposed plan of action is to enter into an installment agreement.
The initiator will establish, and document in the case history, a plan of action for ultimate resolution of the balance due. A prompt assessment will not be recommended in the following instances:
Taxpayer will be granted or already has an existing installment agreement,
Assessment will be reported as currently not collectible,
No distrainable assets,
Pyramiding tax liabilities and no enforcement action is pending.
All applicable penalties must be computed by the revenue officer.
See IRM 126.96.36.199, Quick and Prompt Assessment Actions, for the procedures to follow for quick or prompt assessments on Trust Fund Recovery Penalty cases.
In order for Accounting Control/Services to receive a legible copy of transmitted documents, all forms must be transmitted as original documents. Do not use photocopies of Form 2859T, Prompt or Quick Assessment Transmittal, or Form 2859, Request for Quick or Prompt Assessment.
For a quick or prompt assessment fax request,
Prepare Form 2859, Request for Quick or Prompt Assessment. Form 2859 includes a chart of all required items to be completed for each type of return.
Prepare one Form 2859T, Prompt or Quick Assessment Transmittal Request.
Send a photocopy of Form 2859 to Advisory if receivership proceedings are involved.
Forward Form 2363, Master File Entity Change, if needed to change the Masterfile entity to agree with the information on the tax return, to the appropriate area office function for input.
Fax the assessment package in the following order:
Form 2859T, Prompt or Quick Assessment Transmittal Request,
Form 2859, Request for Quick or Prompt Assessment,
Tax returns (with attachments).
Fax the forms and returns to the Accounting Control/Service. See SERP, Who/Where, Prompt, Quick, Jeopardy and Termination Assessments for the fax number at http://serp.enterprise.irs.gov/databases/who-where.dr/prompt_asses.htm. Fax the forms to the campus where the return would normally be filed. Accounting and Tax Payment Branch in Submission Processing will ensure the fax numbers on SERP are correct.
Input TC 570 as a secondary transaction when posting payments to avoid the possibility of erroneously refunding credits.
Upon receipt, Accounting Control/Services will process the request and either fax the appropriate form, or will telephone acknowledgment of receipt along with the 23–C date and the Document Locator Number (DLN), with corrections to the computation if necessary, to the initiator immediately.
Once the acknowledgment of receipt, the summary date of assessment and a DLN have been received, the original returns can be destroyed.
Processing Form 3552:
If the initiator... Then... Requested the preparation of the Form 3552 The Campus will prepare the Form 3552 and will forward Parts 3 and 4. See below. Did not request the preparation of Form 3552 The initiator will: a. Prepare Form 3552. b. Immediately deliver or mail certified, Parts 3 and 4, along with Publication 1 to the taxpayer. c. Match the manually prepared Form 3552 with IDRS when the assessment has posted to Master File for verification of amounts and other information. d. Take appropriate corrective actions if errors are discovered.
When the Campus discovers a math error on a return submitted for a prompt assessment, they will:
Prepare the Form 3552 and indicate the math error amount.
Isolate the math error and show in (28.) Reference "Additional Assessment (M.E.)" and in (29.) TC "290."
When the taxpayer is given notice of the liability:
Explain parts 3 and 4 of the Form 3552, i.e., the math error assessment.
Advise them of their appeal rights.
Advise them collection action will not be pursued on the math error amount on a contested assessment.
Advise them to address a request for abatement to the campus.
|Taxpayer Identification Number:|
|Contact Telephone Number:|
|Employee Identification Number:|
|(Type on Appropriate Letterhead)|
NOTICE OF JEOPARDY ASSESSMENT AND RIGHT OF APPEAL
|Under section (insert 6861, 6862, or 6867) of the Internal Revenue Code (the Code), you are notified that I have found (insert reason for asserting the jeopardy assessment) thereby tending to prejudice or render ineffectual collection of (insert type of tax) for the period ending (insert tax period). Accordingly, based on information available at this time, I have approved assessment of tax and additional amounts determined to be due as reflected in the attached computation:|
|Taxable Period Tax Penalty Interest|
|For a joint income tax assessment include the following, To ensure that you and your spouse receive this notice, we are sending a copy to each of you. Each copy contains the same information related to your joint account. Any amount you owe should be paid only once.|
|Under section 7429 of the Code, you are entitled to request administrative and judicial reviews of this assessment action.|
|For an administrative review, you must file a written proposal with the Area Director within 30 days from the date of this letter, requesting redetermination of whether or not: (1) the making of the assessment is reasonable under the circumstances, and/or (2) the amount so assessed or demanded as a result of the action is appropriate under the circumstances. A conference will be held on an expedite basis to consider your protest. Your protest will be forwarded to the area Appeals Office where a conference will be held. If you submit new information or documentation for the first time at an Appeals conference, the Appeals Office may request comment from the Area Director on such evidence or documents. Enforced collection action may proceed during any administrative appeal process unless arrangements are made regarding collection of the amount assessed. To make such arrangements, please contact (name of appropriate area official) at (appropriate telephone number).|
|You may pursue a judicial review of this assessment by bringing a civil suit against the United States in the U.S. District Court in the judicial district in which you reside, or in which your principal office is located. However, in order to have this action reviewed by the District Court, you must request administrative review within 30 days of the date of this letter. Such suit must be filed within 90 days after the earlier of : (1) the day the Service notifies you of its decision on your protest, or (2) the 16th day after your protest. The Court will make a determination of whether the making of the assessment is reasonable under the circumstances, and whether the amount assessed or demanded is appropriate under the circumstances. The Court's determination regarding the jeopardy assessment is final and not reviewable by any other court.|
|Appeal to Courts in Case of Income, Estate, Gift, and Certain Excise Taxes|
|If an agreement is not reached with the Internal Revenue Service, a notice of deficiency is required by law to be issued within 60 days from the date of the jeopardy assessment made under section 6861 of the Code. You will then have 90 days (150 days if outside the United States) from the date the notice is mailed to file a petition with the United States Tax Court.|
|Appeal to Courts in Case of Other Taxes Assessed Under IRC 6862|
|Claim for credit of refund of taxes assessed under section 6862 of the Code may be filed in accordance with section 6511(a) of the Code for administrative and judicial review of the merits of the liability assessed. An administrative decision on the claim may be appealed to the courts under the provisions of section 7422(a) of the Code.|
|If you have questions about this letter, you may contact the contact person identified on the front of this letter.|