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Procedural Considerations on Collection (Assessment) – Part Three: Termination and Jeopardy Assessments

In the first article in this series about collection and assessment, we explored the basics of assessment.  In the second article, we examined the nuances of deficiencies.  In this third article, we examine termination and jeopardy assessments.

Termination Assessments

If the IRS finds that a taxpayer aims to quickly do any act tending to prejudice or to render wholly or partially ineffectual proceedings to collect the income tax for the current or the immediately preceding taxable year, unless such proceeding be brought without delay, the IRS may immediately make a determination of tax (for the current taxable year or for the preceding taxable year, or both).  Notwithstanding any other provision of law, such tax (together with all interest, additional amounts, and additions to the tax provided by law) will be immediately assessed and become due and payable and will issue a notice of such determination and assessment, together with a demand for immediate payment of such tax.[1]

The IRS determines the tax for the period beginning on the first day of the taxpayer’s current taxable year and ending on the date of the termination assessment as though such period were a taxable year of the taxpayer and may take into account any prior determination[2] with respect to the taxable year.[3] If the jeopardy assessment provisions apply,[4] then termination assessments are not appropriate.[5]

If the termination assessment is made, the IRS must mail a SNOD for the taxpayer’s full taxable year (not just the short taxable year) related to the assessment within 60 days after the later of (i) the due date of the taxpayer’s return for the taxable year (determined with regard to any extensions), or (ii) the date the taxpayer files his or her return.[6] The deficiency may be in an amount greater or less than the amount of the termination assessment.

Jeopardy Assessments

If the IRS believes that the assessment or collection of a deficiency,[7] will be jeopardized by delay, it may (without mailing a SNOD), immediately assess such deficiency (together with all interest, additional amounts, and additions to the tax), and make notice and demand from the taxpayer for the payment thereof.[8] If the jeopardy assessment is made before any SNOD to which the jeopardy assessment relates has been mailed,[9] then the IRS must mail a SNOD within 60 days after the making of the assessment.[10]

The IRS may assess an amount greater (or less) than the SNOD mailed to the taxpayer,[11] whether or not the taxpayer has filed a petition with the Tax Court.[12] The IRS may abate the assessment (or any portion thereof that remains unpaid). If the petitioner has been filed with the Tax Court prior to making the jeopardy assessment or is subsequently filed, the Tax Court has jurisdiction to redetermine the entire amount of the deficiency and of all amounts assessed.[13]

If the jeopardy assessment is made after the decision of the Tax Court is rendered, the assessment may be made only in the amount of the deficiency determined by the Tax Court in its decision.[14] A jeopardy assessment may not be made after the decision of the Tax Court has become final or after the taxpayer has filed a petition for review of the decision of the Tax Court.[15]

The IRS may abate the jeopardy assessment if it ultimately finds that jeopardy does not exist.[16] This abatement may not be made after a decision of the Tax Court with respect to the deficiency or after the expiration of the period for filing such petition.[17] The IRS’s period of limitation for collection is determined as if the abated jeopardy assessment had not been made (except that the running of the period is suspended until 10 days after the day the jeopardy assessment is abated).[18]


Footnotes:

[1] IRC § 6581(a)(1).

[2] Made under IRC § 6581.

[3] IRC § 6581(a)(2).

[4] IRC § 6861.

[5] IRC § 6581(a)(4).

[6] IRC § 6581(b).

[7] As defined in IRC § 6211.

[8] IRC § 6861(a).

[9] Under IRC § 6212(a).

[10] IRC § 6861(b).

[11] Notwithstanding IRC § 6212(c).

[12] IRC § 6861(c).

[13] Id.

[14] IRC § 6861(d).

[15] IRC § 6861(e).

[16] IRC § 6861(g).

[17] Id.

[18] Id.

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