The Internal Revenue Service (IRS) has a number of remedies at its disposal designed to further the collection of outstanding tax obligations. Among these remedies is a jeopardy assessment, which occurs where the IRS believes following the normal course of tax collection would result in a loss to the IRS and the government.
Under IRC § 6861, if the IRS believes the collection of a particular tax deficiency would be jeopardized by delay, it is authorized to ignore normal collection procedures and immediately assess that deficiency to the tax debtor. Yet this sweeping power does have limits; jeopardy assessments are to be used when reasonable and appropriate, and are limited in both circumstance and in scope to amounts expected to satisfy the debts owed the government. U.S. Legal.Com, Jeopardy Assessment Law & Legal Definition, available at https://definitions.uslegal.com/j/jeopardy-assessment/.
A jeopardy levy is a related IRS remedy whereby the IRS, after making a jeopardy assessment and following the requisite notices and waiting periods, levies on the assets of the tax debtor. While notices and waiting periods are typically required, the same jeopardy rationale applies to those procedural safeguards as well. As a result the IRS can immediately levy on a tax debtors assets under circumstances where it believes the delay involved in making a jeopardy assessment would jeopardize collection. Internal Revenue Service, Section 3: Jeopardy Levy without a Jeopardy Assessment, available at https://www.irs.gov/pub/irs-drop/jeopirm.pdf.
Like most actions of the IRS, jeopardy assessments and jeopardy levy’s can be appealed, the issue being whether the collection of the tax was truly in jeopardy, and even if the appeal is rejected the taxpayer may be able to seek a civil remedy in federal district court. Depending upon the circumstances of the case, an experienced tax attorney may be able to make a strong case against jeopardy, leading to a lifting of the levy and the IRS’ return to its normal collection procedures.
Though jeopardy assessments and jeopardy levies are reserved for extraordinary circumstances, the IRS retains extraordinary remedies that it can use at its disposal when it has grounds to believe the collection of delinquent taxes is in jeopardy. If you believe you are a potential target of a jeopardy assessment or jeopardy levy, or if you have already been subject to such an action and seek to appeal, contact an experienced tax attorney that understands your rights under the federal tax law.
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.