- 4.4.17.1 Introduction
- 4.4.17.2 Jeopardy Assessments
- 4.4.17.3 Termination Assessments
- 4.4.17.4 Transferor/Transferee Cases
- Exhibit 4.4.17-1 Form 1296— Assessment Against Transferee or Fiduciary
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This chapter covers special types of assessments that require special handling and processing:
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Jeopardy Assessment instructions can be found in Text 4.4.17.2.
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Termination Assessment instructions can be found in Text 4.4.17.3.
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Transferor/Transferee Assessment instructions can be found in Text 4.4.17.4.
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Jeopardy assessments are made in situations where prior to the assessment of a deficiency or tax, it is determined that collection of such deficiency or tax, would be endangered if regular assessment and collection procedures are followed.
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A jeopardy assessment must be approved by the Area Director and Area Counsel and be made within 24 hours.
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After the Area Director and Area Counsel have signed Form 2644, prepared in triplicate, interest will be computed by the processing function and an appropriate DLN assigned.
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The following information must be furnished by telephone to the service center Accounting Branch:
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the taxpayer’s name, address and EIN or SSN;
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the type of tax; the taxable period;
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the amount of tax, penalty and interest to be assessed;
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the amount of payment, if any, and the balance due;
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the DLN and 23C date.
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If the jeopardy assessment is for a delinquent return or a terminated period, it must be shown separately and called to the attention of the assessment officer.
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Approval by Area Counsel in writing is now required under the new provisions of the IRS Restructuring and Reform Act of 1998. Failure to do so will result in the abatement of any assessment made under IRC 6201.
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Jeopardy Assessments made under IRC 6867 require that a new taxable entity be created for the person who is in physical possession of the cash.
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A temporary taxpayer identification number (TIN) will be obtained from the service center Entity function. The use of a temporary TIN enables separate tax liability treatment for the possessed cash and avoids any effect on the possessor’s personal individual tax liability which remains separate and apart from the IRC 6867 assessment. All documents requiring entity information must use "(Possessor’s Name) as Possessor of Certain Cash" as the name line.
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The assessment officer will telephone the person requesting the jeopardy assessment to acknowledge that the assessment has been made.
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A confirmation copy of Form 3552, or TY–26, Form 17, is mailed to the areas by the service center after processing, and must be associated with the control copy in the Case Processing Support function.
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The original and one copy of Form 2644 will be transmitted promptly in a sealed envelope to the service center Accounting Branch, Accounting and Control System, Journal and Ledger Unit, to the attention of the assessment officer previously contacted for verification that the correct assessment has been made and for association with the assessment assembly.
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Code Section 7429(a) (1), as amended by the IRS Restructuring and Reform Act of 1998 requires that a written explanation be provided to the taxpayer within 5 days setting forth the basis on which the IRS relied in making the assessment or levy.
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A termination assessment is made when it is found that a taxpayer would act to prejudice, or to render wholly or partially ineffectual, the collection of income taxes for a current or immediately preceding taxable year, unless collection proceedings are brought without delay.
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Form 5344 is prepared only after the examination of the full tax period has been completed. It cannot be processed when the tax period is terminated.
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Form 3198 is attached to the case file, with Terminated Tax Period Case printed in the Special Handling section.
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When an assessment involves the termination of a taxpayer’s year, the liability for the short tax period will be handled as a jeopardy assessment at the time of termination. No Form 5344 will be secured or Audit adjustment made at that time. To prevent possible forfeiture of lien rights, the original short period assessment must not at anytime (prior to determination of the tax liability for the full year) be reduced to an amount less than the correct tax liability for the full year.
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The termination assessment is made as a short period Non-Master File (NMF) assessment. When the case is received by Processing for assessment of the full period, the short period NMF assessment will be transferred to Master File (MF).
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As with any Jeopardy Assessment, prior approval is required in writing by both the Area Director and the Area Counsel. (See Text 4.4.17.3)
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A written statement must be provided to the taxpayer within 5 days of assessment setting forth the basis on which the IRS relied in making the assessment. (See Text 4.4.17.2.4 above.)
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There are two types of termination assessments and they receive different treatment when they are transferred to MF.
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When a termination assessment is made against the taxpayer with his correct TIN, the NMF data may be merged with the taxpayer’s full period module if it is already on MF.
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If a termination assessment is made against a taxpayer as a "Possessor of Certain Cash" the entity portion of the NMF must contain the taxpayer’s name and the words "Possessor of Certain Cash." The assessment will be made using a temporary TIN. At the time the "Possessor of Certain Cash" termination assessment is transferred to MF, it must NEVER be merged with any module established under the taxpayer’s correct TIN. See IRM 3.13.5, IMF Account Numbers, text 3.13.53.2, Assignment of an IRS Number because of a Termination/Jeopardy Assessment.
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The tax period for the full year should be established on MF at the time of this transfer; TC 150 may or may not be present. If there is no TC 150 posted on MF for the full period, the case file will contain an unprocessed original return or a substitute for return.
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When the case is ready for final closure on the full year process the case as described below.
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Coordinated with the Criminal Investigation function for the release of the TC 914 freeze, if it exists.
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One cycle later input TC 570, using Form 3177 on MF. Do not input TC 570 for a non-examined case.
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One cycle after input of TC 570, process the full period return or substitute for return, retaining a copy in the case file. (This step is not necessary if TC 150 has already posted.)
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After TC 150 has posted, take the appropriate action described below.
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Transfer of the NMF short period assessment to MF by Service Center Accounting will be requested on Form 3465. The transfer will be with a TC 290 and maintaining the 23C date of the original termination assessment. If the combined short period and full period credits exceed the combined debits, request that Accounting transfer the credits with a secondary TC 570 for zero to hold the credits until the TC 300 posts.
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If the full period return was processed NMF, indicated by a DLN with Tax Class 6, initiate a request (via Form 3465 to transfer both the full period and short period accounts to MF under the full period. Procedures to request this transfer are as follows.
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If the short period assessment was processed NMF, prepare Form 3465 requesting transfer of both the full period and short period accounts to MF under the full period, transferring the full period with TC 370 and TC 150 and the short period with TC 290, maintaining the 23C date of the original termination assessment. In the remarks section, indicate this is a termination case.
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If the short period assessment was processed to the IMF, prepare Form 3465 requesting transfer of the full period account to MF with TC 370 and TC 150. On the same Form 3465, also request that Accounting Branch "backout" the MF short period account with TC 000, and that the short period account be transferred under the full period account with TC 290 maintaining the 23C date of the original termination assessment. Attach a copy of the MF short period account to Form 3465, underlining the taxpayer’s name and TC 150 in red. In the remarks section, indicate this is a termination case.
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In both 1 and 2 above, if combined short period and full period credits exceed the combined debits, indicate on the Form 3465 that accounting should transfer in the excess credits with a secondary TC 570 zero. This will freeze the credit until the TC 300 posts.
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Enter a posting delay code of 6 in Item 43 and input Form 5344 for the full tax period. The tax adjustment on Form 5344 must be in the amount necessary to increase or decrease the total tax assessment to the correct liability.
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Transferor-transferee cases will be received with Form 3198 attached. The transferor may be a corporation, an individual, or an estate. The transferee may be a corporation, an individual, an estate or an executor or administrator of an estate or a fiduciary.
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In situations where Form 3198 indicates "Total Transferee Liability Exceeds Transferor Liability," process in the following manner.
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Work the transferor case file as a unit following normal procedures using DC12 on Form 5344 or DC03 on Form 5403.
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Process a NMF assessment using Form 1296 and 2859. This assessment may be mailed, telephoned or faxed to accounting. Exhibit 4.4.17–1 contains instructions for completing Form 1296. See IRM 3.17.46, Automated Non-Master File for additional information.
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Include the following on Form 1296:
* Waiver date
* Payment date
* Statute date
* Other transferee’s
* Other transferee’s Tin’s -
Number the assessment in the blocking series assigned to the original class of tax, regardless of the transferee (i.e., the assessment against an individual as transferee of a corporation will carry a corporation DLN).
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Further information on the completion of Form 1296 is contained in Exhibit 4.4.17–1.
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The assessment may be made against the transferor, as well as one or more transferees. The assessment against the transferee may be for the full amount due by the transferor or may be in a lesser amount (limited liability) . If liability is limited and more than one year is involved, one assessment will be made for the multiple years. List on Form 1296 the total amount to be assessed and amounts for each transferee. In transferee limited liability cases interest is computed from date of transfer.
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Under Code Section 6901(a) (2), assessment may be made of the liability of a transferee for excise and employment taxes incurred under the 1954 code if the transferee liability arises from the liquidation of a partnership or a corporation or a reorganization within the meaning of Code Section 368 (a).
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In such a case, if the transferee agrees to pay the tax due, the examining officer will prepare a supplemental return for the taxpayer or collecting agency involved. The transferee will evidence his or her agreement by signing the return as transferee under IRC 6901 (a) (2).
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Do not process the supplemental return prepared by the revenue agent, but instead, prepare Form 1296 as the assessment document. Specify the type of tax and enter it under "Other Tax" on Form 1296. If an Appeals hearing is requested, transfer the case to the Appeals Office prior to assessment.