If you are asking the question "What is an IRS Jeopardy Assessment?", then more than likely you are either someone who (1) is holding on to someone's money, (2) have gotten into a bit of a rough spot yourself with the IRS, or (3) you are a tax professional who has a client who might have some tax troubles and is wondering what to do. In this article, I will discuss what an IRS Jeopardy Assessment is, why the IRS would make one, and what are some likely next steps the government would make.
What does "Jeopardy" mean?
A Jeopardy Assessment can mark a significant escalation of a tax problem. One is made when the IRS believes it is at risk of losing its money because a taxpayer (or someone who holds cash of another taxpayer) is going to take some sort of action that will make it difficult for the IRS to later collect.
This assessment allows the IRS to forgo the typical assessment process that can take months (if a taxpayer files a return) or years, (if no return is filed and the IRS prepares a substitute-filed return, or SFR).
So when can the IRS file a Jeopardy Assessment? According to IRM 1.2.13.1.27 (Policy Statement 4-88):
"Jeopardy Assessments should be used sparingly and care should be taken to avoid excessive and unreasonable assessments. They should be limited to amounts which reasonably can be expected to protect the Government. Each Jeopardy Assessment must receive the personal approval of the District Director, or other delegated official. In addition, prior approval (in writing) by Chief Counsel (or such delegate) is required."
One of the following circumstances must be present to get the personal approval of an IRS District Director and prior written approval from IRS Chief Counsel:
- A taxpayer is, or appears to be, quickly departing from the United States or going "underground" and making it impossible to find him;
- A taxpayer is, or appears to be, quickly attempting to place his property beyond the reach of the Government; either by removing it from the United States, by concealing it, by dissipating it, or by transferring it to other persons;
- A taxpayer's financial solvency is, or appears to be, imperiled from reasons other than incurring a tax debt;
- You are in possession of $10,000 or more in cash (or equivalent) that is not yours, and, pursuant to 26 USC 6867, the IRS presumes a tax debt must be due to whoever owns the cash, and the IRS will be in jeopardy of losing the tax if they don't act quickly (this might not be a big issue for the person holding the cash; the IRS will make the Jeopardy Assessment, which will give you the legal ability to pay over the cash without repercussions from who actually owns the money.)
What Happens After an IRS Jeopardy Assessment?
As you may have noticed, the Jeopardy Assessment does not actually put any money into the hands of the IRS. Oftentimes, one will come before an IRS jeopardy federal notice of tax lien and/or an IRS jeopardy levy. If you need assistance with a levy, lien, or assessment, contact us. We can help.
