6-8.010 - Introduction
The collection of judgments is an essential part of the Tax Division's work. It requires imagination, perseverance, and skill in using federal tax lien and levy law, post-judgment discovery, judicial sale procedures, the Federal Debt Collection Procedures Act (FDCPA), and state judgment execution laws. In its Judgment Collection Manual, the Tax Division sets forth the Tax Division's collection policies, explains the laws that authorize enforced judgment collection, and offers suggestions about how to collect tax judgments.See http://www.justice.gov/tax/readingroom/JCM2004/JCUtitlepg.htm.
6-8.100 - Tax Division's Responsibility
After a court has entered a money judgment in favor of the United States, either in a suit originating as a collection matter or on a counterclaim, the trial attorney will follow the collection steps outlined in the Tax Division Judgment Collection Manual. During this period of initial collection activity, the Tax Division has the primary responsibility for collecting the judgment.
If the trial attorney is unable to collect the entire amount of the judgment and the court or the parties terminate the litigation, the Tax Division generally refers the judgment to the IRS for further administrative collection and closes its file. On occasion, and only after consultation, the Tax Division may formally refer a judgment to the United States Attorney's Office Financial Litigation Unit (FLU) for further collection efforts. Should it subsequently appear that the Government needs to pursue additional litigation to collect the judgment (e.g., to set aside a fraudulent conveyance), the Tax Division may elect to withdraw the referral and conduct the litigation.
6-8.200 - United States Attorney's Responsibility
There are two categories of tax judgment collection cases, for which the United States Attorney has different responsibilities: cases that the Tax Division has formally referred to the United States Attorney to collect a judgment and cases in which the United States Attorney assists the Tax Division in collecting a judgment. Tax Division Directive No. 105. See Tax Resource Manual 28.
- Formal judgment collection referrals. On occasion, and only after consultation, the Tax Division may formally refer a judgment for collection to the United States Attorney. When it makes a formal referral, the Tax Division will send the United States Attorney a letter stating that it has formally referred the judgment collection case.
In these formal judgment collection referrals, the United States Attorney has the primary responsibility to take further collection efforts. To that end, he or she should take all necessary steps to collect the judgment and to protect the Government's interests. When it refers the case to the United States Attorney, the Tax Division may concurrently request the IRS Technical Services to advise the United States Attorney directly of the existence of potential assets for collection.
The United States Attorney should advise the Tax Division if any problems arise, including any disagreements between the United States Attorney and the IRS about the handling of a formally-referred case. The Tax Division then will assist the United States Attorney in resolving those problems.
Should it appear that the Government needs to pursue additional litigation in order to collect the judgment, the Tax Division may withdraw the referral to the United States Attorney and take responsibility for the litigation.
- Case Assistance. In judgment collection cases where the Tax Division has not formally referred the case, the United States Attorney has more limited responsibilities. He or she may have open files and furnish assistance to the Tax Division trial attorney who is assigned to the case. In these cases, however, because the Tax Division has not referred the case to the United States Attorney for handling, the Tax Division will retain primary collection responsibilities.
6-8.300 - Compromise Authority of United States Attorneys
As provided in Tax Division Directive No. 105, the Tax Division has authorized United States Attorneys to:
- Reject offers in compromise of judgments in favor of the Government regardless of amount;
- Accept offers in compromise of judgments in favor of the Government, where the amount of the judgment does not exceed $300,000; and
- Terminate collection activity for judgments in favor of the Government which do not exceed $300,000, if the United States Attorney concludes that the judgment is uncollectible.
The Tax Division authorizes the United States Attorney to take these actions only for judgments that the Tax Division has formally referred to the United States Attorney for collection. Before taking these actions, the United States Attorney must obtain the written concurrence of the IRS.
The United States Attorney must refer to the Tax Division for resolution offers to compromise judgments where: 1) the United States Attorney and the IRS have a difference of opinion; or 2) the judgment exceeds $300,000.
6-8.400 - Collection of Tax Judgments—Collection Procedures
The United States Attorney should consult the Tax Division's Judgment Collection Manual for a detailed discussion of special procedures used in collecting tax judgments. These procedures are different from those used when the United States Attorney collects other judgments in favor of the United States. For example, the IRS can use a levy to collect a tax judgment; state exemption statutes do not apply to tax judgments; and federal tax liens have special characteristics. See 26 U.S.C. § 6323. Additionally, post-judgment interest on tax judgments accrues at a different rate than the non-tax judgment rate and is compounded daily. See http://www.justice.gov/tax/readingroom/JCM2004.
6-8.420 - Collection of Tax Judgments—Disclosure and Use of Tax Returns and Tax Return Information
Pursuant to 26 U.S.C. § 6103(h)(2)(A), the IRS may disclose tax returns and return information of tax judgment debtors to the United States Attorney for use in collecting tax judgments. The statute prohibits the disclosure or use of such returns and return information to collect non-tax judgments in favor of the United States. The United States Attorney must use extreme care to ensure that returns and return information are used only to collect tax judgments.
6-8.430 - Collection of Tax Judgments—Assistance of IRS Personnel
The IRS specially trains its local IRS Technical Services personnel in the collection of tax indebtedness. The Technical Services staff also has continuing access to financial data that is contained in tax returns that the judgment debtor may have filed after the United States obtained the judgment. The United States Attorney may find this information useful in judgment collection efforts.
The United States Attorney should request that the IRS Technical Services verify any financial statement that a taxpayer submits in connection with an offer to compromise a judgment or in response to a request for financial information.
[updated September 2007]