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Tax Division Judgment Collection Manual - 1. Introduction

Judgment Collection Manual

I. Introduction

          Collection of judgments is an essential part of the Division's work. It requires imagination, perseverance, and skill in using federal tax lien and levy law, postjudgment discovery, judicial sale procedures, the Federal Debt Collection Procedures Act (FDCPA), and state judgment execution laws. This Tax Division Judgment Collection Manual sets forth the Tax Division's collection policies, explains the laws authorizing enforced judgment collection, and furnishes suggestions as to how to collect tax judgments. The legal discussions and suggestions are not intended to be exhaustive, but merely to serve as a guide for collection activities. This manual and the exhibits and forms included with it are not intended to create or recognize any legally enforceable right in any person.

A. Timeliness

          Collection should be pursued promptly, as well as vigorously, uniformly, and fairly; delay greatly reduces the likelihood of collection. In most cases, the trial attorney should complete initial collection efforts within nine months after entry of judgment. Collection of amounts owed pursuant to a settlement, especially in the early stages, should be monitored closely. If default occurs, appropriate action to enforce collection should be taken promptly.

B. Referral or Retention

          After initial collection efforts have been completed, the trial attorney and section chief or assistant chief should decide whether to retain the case or refer it to the IRS (or United States Attorney). In making that decision, an attorney should consider whether the IRS has already attempted to effect collection administratively1. If the IRS has referred a suit to reduce assessments to judgment and to foreclose the tax liens on identified property of the taxpayer, it is likely that the IRS has already exhausted its administrative collection efforts. Cases in this category are often prime candidates for referral to the IRS for monitoring as soon as the uncollectibility of the judgment is confirmed. The determination of uncollectibility must be made as of the time the judgment is obtained and should not be based on the IRS's determination made when the case was initially referred (a determination that often is made years earlier than the date of the judgment). The steps necessary to transfer a judgment to the IRS are set forth at § VII.B, infra.

          In some cases, however, administrative remedies either were not available to, or were not exhausted by, the IRS. For example, liabilities for failure to honor a levy and liabilities under I.R.C. § 3505 are not assessed, and thus, cannot be the subject of a presuit IRS levy. Also, in trust fund recovery penalty refund suits and other partial-payment refund cases involving divisible assessments in which we file counterclaims, the IRS is generally required to defer collection during the pendency of the litigation. The IRS may not have worked these cases thoroughly from a collection standpoint, and many of the cases may have substantial collection potential.

          If initial investigation or postjudgment discovery reveals collection potential, a case should be retained by the Tax Division.

C. Using paralegals

          Successful judgment collection will require substantial amounts of the trial attorney's time, but the attorney should seek the assistance of a paralegal for some of the more routine collection tasks, such as initial demand letters and initial collection interrogatories.

D. Reporting activities

          As explained in Part VI, infra, it is essential that attorneys and paralegals accurately and promptly report their collection and payment activities on TaxDoc, the Division's automated case management system. Additionally, paralegal and attorney time spent on collection matters should be reported on TaxDoc time reports as "Collection Activities" for the designated case. Accurate time and activity reporting enables Division management to track both the status of outstanding judgments and the amount of attorney and paralegal time devoted to judgment collection.

1. As used in this Manual, the terms "administrative remedies" or "administrative collection" refer to collection actions that the Internal Revenue Code (I.R.C.) authorizes the IRS to take after assessment. Administrative collection may be pursued without first obtaining a judgment in a court (and can also be pursued after entry of judgment). In contrast, authority for collection actions that the Tax Division may take arises from the Government's status as a judgment creditor and is generally based on provisions in the Judicial Code (28 U.S.C.), the Internal Revenue Code, and the Federal Rules of Civil Procedure.

Updated April 9, 2024