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Part 4. Examining Process

Chapter 15. Jeopardy/Termination Assessments

Section 1. Jeopardy and Terminations

4.15.1  Jeopardy and Terminations

4.15.1.1  (06-30-1999)
Overview

  1. This section provides an overview of the purpose of the jeopardy and termination provisions of the Internal Revenue Code (IRC). This gives 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.

  2. 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.

  3. This text includes the following sections:

    1. OVERVIEW

    2. EXAMINATION PROCEDURES

    3. ASSESSMENT PROCEDURES (CASE PROCESSING SUPPORT)

    4. ADMINISTRATIVE AND JUDICIAL REVIEW

    5. POST-ASSESSMENT PROCEDURES

    6. QUALITY MEASUREMENT STAFF GUIDELINES

    7. PLANNING AND SPECIAL PROGRAMS PROCEDURES

4.15.1.2  (06-30-1999)
Use

  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.

4.15.1.3  (06-30-1999)
Approval

  1. Each jeopardy/termination assessment must receive the personal approval of the area director. Policy Statements P–4–88 and P–4–89; Delegation Order No. 219 as revised. In addition, the IRS Restructuring and Reform Act of 1998 requires written approval by Chief Counsel (or such delegate).

4.15.1.3.1  (06-30-1999)
Prior Headquarters Office Notification

  1. In any case which might cause serious inconvenience to the general public, the Director, Compliance must be notified. If necessary, the Director, Compliance will notify the Commissioner, SB/SE. 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.

4.15.1.3.2  (06-30-1999)
Exclusions

  1. The area director must exclude himself/herself from personal involvement in cases where:

    1. He/she has had access to grand jury information,

    2. He/she falls under the restrictions contained in the Internal Revenue Manual (IRM). See IRM 6.700, Handbook for the Rules of Conduct, or

    3. He/she has reasonable cause.

4.15.1.3.3  (06-30-1999)
Order of Approval

  1. If the area director is unable to approve the jeopardy/termination, the following officials are delegated the authority to personally approve a jeopardy/termination in the order prescribed below:

    1. Field Territory Manager;

    2. Special Agent In Charge, Criminal Investigation;

    3. Director, Employee Plans;

    4. Director, Exempt Organizations; or

  2. The authority of the Chief Counsel to approve a jeopardy/termination has been delegated to Division Counsel. Contact Counsel for assistance in obtaining written approval.

4.15.1.4  (06-30-1999)
Definitions

  1. A jeopardy/termination assessment is defined as a jeopardy, termination, possessor of cash jeopardy, or possessor of cash termination assessment.

4.15.1.4.1  (06-30-1999)
Jeopardy Assessment

  1. 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 authority for jeopardy assessments is:

    1. IRC 6861 for income, estate, gift, and certain excise taxes;

    2. IRC 6862 for taxes other than income, estate, gift and certain excise taxes; and

    3. IRC 6867 for "Possessor of Cash."

4.15.1.4.2  (06-30-1999)
Termination Assessment

  1. 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 authority for termination assessments is:

    1. IRC 6851 for income tax; and

    2. IRC 6867 for "Possessor of Cash."

4.15.1.4.3  (06-30-1999)
Possessor of Cash Assessment

  1. If an individual, in physical possession of cash or its equivalent in excess of $10,000, does not claim the cash as his/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 and 6861:

    1. The cash is presumed to be from a single individual;

    2. The cash represents gross income for the taxable year in which the possession occurs; and

    3. The collection of tax is presumed to be jeopardized by delay.

4.15.1.5  (06-30-1999)
Responsibility

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

4.15.1.5.1  (06-30-1999)
Examination

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

  2. Appeals may forward a report to Exam, on a case pending before Appeals, for Exam to determine if a jeopardy/termination exists. Exam 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.

4.15.1.5.2  (06-30-1999)
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 Exam, Criminal Investigation, or 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.

4.15.1.5.3  (06-30-1999)
Criminal Investigation

  1. Criminal Investigation (CI) is responsible for recommending jeopardy/termination assessments in cases under active consideration or joint active consideration by CI, Cl and Exam, CI and Collection, or CI and TE/GE.

  2. If CI receives information on cases under active consideration by another Territory Function, the Special Agent In Charge, CI should report such information by memorandum to the affected Territory Function.

4.15.1.5.4  (06-30-1999)
TE/GE

  1. Tax Exempt and Government Entities Division (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 Exempt Organizations should report such information by memorandum to the affected Territory Function.

4.15.1.5.5  (06-30-1999)
Appeals

  1. Appeals will forward a report to Exam or TE/GE, as applicable, if during an Appeals consideration of a case, it is determined that a jeopardy/termination may be advisable. Exam or TE/GE is responsible for recommending the jeopardy/termination assessment.

4.15.1.5.6  (06-30-1999)
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.

4.15.1.6  (06-30-1999)
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/herself.

    2. The taxpayer is, or appears to be, designing quickly to place his/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/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.

4.15.1.7  (06-30-1999)
Potential Criminal Case

  1. After the referral of a case to CI or during a joint investigation, it shall be the continued responsibility of Exam 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. Policy Statement P–4–84.

  2. The purpose of criminal tax investigations is to enforce the tax laws and to encourage voluntary compliance. Experience has demonstrated that attempts to pursue both the criminal and the civil aspects of a case concurrently may jeopardize the successful completion of the criminal case.

4.15.1.7.1  (06-30-1999)
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. 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.

4.15.1.7.2  (06-30-1999)
Civil Enforcement

  1. Cl Opinion — Generally, if the taxpayer is under criminal investigation, the civil aspect is suspended pending the outcome of the criminal action. Contact CI to determine whether to proceed with the civil aspect. If agreement cannot be reached with Cl, the opinion of Counsel will be obtained.

  2. Counsel Opinion — If there is doubt as to whether a proposed civil action would imperil prosecution, the opinion of Counsel will be obtained.

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


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