Internal Revenue Manual - 25.3.2 Suits by the United States

IRS Resources

Part 25. Special Topics
Chapter 3. Litigation and Judgments
Section 2. Suits by the United States

Review IRM 5.17.12 of the Legal Reference Guide for Revenue Officers, for information about investigations and reports. This includes samples of Revenue Officers’ narrative reports.

Note:

Prepare all documents in quadruplicate.
Prepare a narrative report, using Form 4478, Civil Suit Checklist, as a guide.
Complete the following forms for all recommendations:
- Form 4477, Civil Suit Recommendation
- Form 4478, Civil Suit Checklist
- Form 4481, Transmittal—Legal Action
Complete the following forms if the suit involves specific property:
- Form 4479, Lien and Claimant Data—Civil Suit
- Form 4480, Property Description—Civil Suit
If the property is an insurance policy, include the following information on Form 4480
- name and address of insurance company
- policy number
- date of policy
- amount of policy
- cash surrender value
- amount of any loan outstanding and date made
- whether the loan was an automatic premium loan
- whether the insurer is holding any accumulated dividends
- whether the taxpayer has the right to change the beneficiary
- name and address of each beneficiary
Include in the package, copies of all pertinent documents.

When the recommendation is complete, forward it to Technical Support function for review and processing. Include in your transmittal a request for BAL DUE closing, if applicable.
Retain the account in inventory. TSf will input a closing transaction after review.

Open a case on the Integrated Collection System (ICS)
Review the recommendation. Consider whether it meets all criteria for bringing suit.

Order certified transcripts and original returns and administrative files.
Input TC 520 with the appropriate closing code. See Exhibit 25.3.2–1.
Make a Settlement Option Procedure (SOP) determination.
When all documents have been gathered, secure approval and forward the file to Counsel.

The following types of cases may be designated SOP as long as the amount in dispute is less than $200,000:
- suits to reduce to judgment
- suits to recover erroneous refunds
- suits to establish fiduciary liability
- suits to establish liability under I.R.C. § 3505
- suits to establish transferee liability
- bankruptcy, insolvency, or probate proceedings
- suit for failure to honor a levy
You may recommend that a suit be excluded from SOP, based on one or more of the following considerations:
- the taxpayer is in flagrant noncompliance
- settlement may create difficulty in collecting from other taxpayers in the community
- the case is especially sensitive
- other factors which would make settlement inappropriate or
  inadvisable
Note Form 4477, Item 3, "Settlement Option Procedure" or "No Settlement Option Procedure."

At least annually determine the status of all open recommendations, matching the ICS inventory with the listings produced by the Litigation Accounts Management System (LAMS).
If a recommendation is rejected by Counsel or the Department of Justice, reverse all input transactions and advise the originator.
See IRM 25.3.5 for information on processing judgments.

Type of Suit	CC	Suspends BAL DUE	Suspends COLSED

Enforce Federal Tax Lien, Failure to Honor a Levy, Open Safe Deposit Box, Injunction, Wrongful Levy	70	Yes	No
	75	No	No
Refund Suit	71	No	No
	73	Yes	No
Suit to Reduce Claim to Judgment	80	Yes	Yes

Part 25. Special Topics