Can’t Wait?

Jeopardy assessments are made under IRC 6861 or IRC 6862. These sections provide an expedited assessment procedure when tax collection is endangered if regular assessment and collection procedures are followed. IRC 6867 allows the Service to presume that tax collection will be jeopardized in certain circumstances where an individual is in physical possession of an unidentified large amount of cash.

Service policy on jeopardy assessments is found in Policy Statement P–4–88. Also see IRM 4.15, Examining Process, Jeopardy/Termination Assessments, and IRM 5.1.4, Collecting Process, General Handbook.

Under IRC 7429(a), the Compliance Area Director has five (5) days after a jeopardy assessment to furnish the taxpayer with a written statement of the information the Service relied on in making the assessment. See IRM 5.1.4.1 for pattern letters.

As a result of the enactment of the IRS Restructuring and Reform Act of 1998 on July 21, 1998, it is now a statutory requirement for Chief Counsel or his/her delegate to approve all jeopardy and termination assessments and all jeopardy levies. Approval is now required by Counsel in ALL cases, not just in cases where time permits.

Jeopardy assessments initiated by Collection personnel are limited to proposed:

A jeopardy assessment is requested when:

The area Examination function occasionally investigates cases pending in Appeals to determine the need for a jeopardy assessment. An investigation by the Examination function is limited to whether collection of any proposed deficiency is endangered by any circumstance that might adversely affect the taxpayer's ability to pay or the Government's ability to collect. Appeals keeps responsibility for making the final determination of the tax liability in controversy.

If a jeopardy assessment is not warranted on a case referred to the area for investigation, the Area Director returns the case to the Appeals Office with a notice to that effect.

When a jeopardy assessment is warranted, it is made by the Area Director. The case and jeopardy assessment file are immediately returned to the Appeals Office that referred the case. In income, estate and gift tax cases, Appeals issues any notice of deficiency required by IRC 6861(b). Send a copy of the notice of deficiency to the appropriate Examination function.

When a case and jeopardy assessment file are returned to Appeals, only consider the issues in the tax case. The taxpayer needs to ask for a review of the jeopardy for Appeals to consider it.

Some jeopardy assessments lend themselves to complete resolution of both the merits of the case and the reasonableness of the assessment. Therefore, both aspects can be resolved by agreement if the action is taken within 15 days after the taxpayer's request is filed or the taxpayer decides not to request judicial review of the assessment in District Court.

The Area Director makes a termination assessment under the conditions found in Policy Statement P-4-89 and the procedures in IRM Part 4. Time limitations for holding Appeals conferences, rendering a prompt decision, and statutory provisions for filing suit in District Court are the same as for jeopardy assessment.

Because of time limitations involved, if the taxpayer provides new information or documentation to the AO, the Area Director may need to promptly comment on the new evidence. Appeals retains jurisdiction over the case in instances where the Area Director comments on the new evidence.

Inform the taxpayer of the right to judicial review when a taxpayer does not agree with the Appeals decision. Return the case file and a report, in duplicate, to the Area office Examination function.

At the end of the full tax year, the taxpayer is required to file a full year return. Generally, Examination function is responsible for issuing the notice of deficiency required under IRC 6851(b) for the taxpayer's taxable year. Area office and Campus controls are established to determine whether or not the taxpayer files a full year return.

Examination function either examines the taxpayer's return or prepares a substitute for the return. The taxpayer may protest the notice of deficiency and come to Appeals. In some cases, it is possible for Appeals to receive the case prior to issuance of the notice of deficiency. In these cases, Appeals issues the notice of deficiency. If Appeals issues the notice of deficiency, a copy of the notice is sent to the appropriate Examination function.

These cases will not be controlled on AIMS unless the taxpayer files a return with Examination for the full taxable year. If the taxpayer does file, Examination will establish the full year return on AIMS.

Appeals findings will result in one of the following actions:

If Appeals sustains the district in full (taxpayer does not agree):

If Appeals sustains the district in part (taxpayer does not agree):

If Appeals finds that the termination was not warranted:

If Appeals reaches agreement with the taxpayer:

If the taxpayer files a civil suit at any time prior to the conclusion of the administrative appeal, Collection (SPF) will request the entire file, including Form 5402. Appeals procedures will be suspended.

Retain a copy of the file to issue a statutory notice within the required period for issuance, which is 60 days after the later of the date the taxpayer files a return for the full taxable year or the due date of the return as extended. The 60-day period does not commence until a return for the taxpayer’s annual accounting period is filed. Send a copy of any report prepared by Appeals to Counsel within 24 hours. On ACDS, enter:

Send the following to the Compliance Area Director:

Transmittals to Examination and requests for abatements should be coordinated with Examination prior to returning the case files. Prepare Form 5403 marking the "Source Document Only" box at the top of the page.

Prepare Form 5403 for any full year returns established on AIMS. In Item 12 enter the NET deficiency (overassessment). Consider the amount previously assessed (including the termination assessment) and the tax liability on any tax return filed for the full year.

Show the following computation in Item A or as an attachment, cross-referenced in Item A. Include a transcript of account in the administrative file.