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Tax Division Judgement Collection Manual - 3. Entering Judgment, Stays Of Collection, And Obtaining A Judgment Lien

Judgment Collection Manual
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III. Entering Judgment, Stays of Collection, and Obtaining a Judgment Lien

A. What is a Judgment?

          A judgment is "any order from which an appeal lies." Fed. R. Civ. P. 54(a). Fed. R. Civ. P. 58 provides that a judgment "shall be set forth on a separate document." A judgment "should be a self-contained document, saying who has won and what relief has been awarded, but omitting the reasons for this disposition, which should appear in the court's opinion."13 Nevertheless, Rule 58, as amended effective December 1, 2002, provides that a judgment or amended judgment will be considered entered either when set forth on a separate document and entered on the docket or – even if not set out on a separate document as required – after 150 days from the docket entry. Rule 58 thus statutorily modifies United States v. Indrelunas, 411 U.S. 216 (1973), which had effectively safeguarded a judgment debtor against forfeiture by requiring a judgment to be entered on a separate document, with no stated time limit (although presumably subject to a laches argument). TheIndrelunas court had held in that case that the final appealable order was the money judgment entered some two years after the jury verdict, and not the civil docket entry "Enter judgment on the verdicts. Jury discharged."

          The courts have generally construed the term "final decision" as used in 28 U.S.C. § 1291 as a decision that disposes of all claims of all parties in a lawsuit. A decision that disposes of fewer than all claims or all parties is, as a general rule, a nonappealable interlocutory order. An important exception to this general rule is provided in Fed. R. Civ. P. 54, which permits a court, when multiple claims and/or parties are involved, to direct entry of a final judgment upon an express determination by the court that there is no just reason for delay. Rule 54(b) becomes important if we obtain a favorable decision as to one of several claims or one of several parties. This situation arises commonly in trust fund recovery suits where several responsible persons are joined as defendants on the Government's complaint or counterclaim, and the Government obtains a default judgment or summary judgment against one defendant but has to proceed to trial before obtaining judgment against others. When this happens, a trial attorney should request the court to make a Rule 54(b) determination and direct entry of final judgment. This will allow the Government to proceed without delay to collect the judgment.

          Accordingly, unless otherwise specified, the term "judgment" as used in this Manual means either a final decision that disposes of all claims of all parties in a lawsuit, or a 54(b) decision.

B. Form of Judgment

          A money judgment in favor of the United States in a tax case should state one figure that is the entire amount to which the United States is entitled, including tax, assessed interest and penalties, collection fees (including lien notice filing fees), and accrued but unassessed interest and penalties. In addition, the language of the judgment should make clear that it covers interest, penalties, and collection fees that may accrue in the future. A judgment should also state that it includes costs under 28 U.S.C. § 1920, unless none were incurred, although the amount of those costs need not be specified.

          Under 28 U.S.C. § 1961(c)(1), interest accrues on tax liabilities, including judgments, at the rate set forth in I.R.C. § 6621. That rate can change quarterly, so tax judgments should not specify a numerical rate of interest. Under I.R.C. § 6622, interest on tax liabilities, including judgments, compounds daily. Interest accrues on the entire unpaid balance of the liability, including interest and penalties.14

          The trial attorney should contact the IRS and obtain a payout figure including all tax, penalties, interest, and collection fees, for a date close to, but not after, the date on which the judgment will be entered by the court. The judgment should recite that "judgment is entered in favor of the United States and against [taxpayer] for unpaid [type] taxes for the [period of liability] in the amount of $_________, plus interest and other statutory additions accruing from and after [date of payout figure]." Sample forms of judgment are attached as Exhibits 3, 4, and 5.

          We generally should not set out the terms of a settlement in the judgment. If there is a default on the settlement obligations, we want to execute on the judgment, and the terms of settlement are academic. The exchange of correspondence (offer and acceptance letters) that constitutes the settlement agreement is a contract, which protects the taxpayer. The judgment for the full amount of the liability is to protect the Government in case the taxpayer defaults on obligations under the settlement. When the judgment is for the full amount sought from the taxpayer instead of the lesser amount accepted under the settlement, the judgment also serves to give the taxpayer a strong financial incentive to comply with the terms of the settlement.

          A judgment securing installment payments (or collateral agreement payments) under a settlement should be entered immediately, and the abstract of judgment filed promptly to create a judgment lien.

C. The Judgment Should Include an Award of Costs

          The United States, like any other litigant, is entitled to an award of costs when it prevails in an action.15 The district courts use a standard form for the bill of costs (AO 133),16 which the trial attorney should submit to the clerk.17 Only those costs enumerated in 28 U.S.C. § 1920 are taxable.18 Before submitting a bill of costs, the attorney should also check the local rules, which often contain provisions relating to taxation of costs.

  • fees of the clerk (28 U.S.C. § 1920(1)): The United States as plaintiff may seek as a cost an amount equal to the clerk's filing fee (even though the United States is not required to pay the fee).19

  • fees for services of marshal (28 U.S.C. § 1920(1)): The fees of the United States Marshal for service of summonses and subpoenas, pursuant to 28 U.S.C. § 1921, are taxable. There is conflicting authority whether the fees of private process servers are taxable.20

  • fees of court reporters (28 U.S.C. § 1920(2)): This includes fees for deposition transcripts and for court transcripts, including any pretrial or post-trial hearings, "necessarily obtained for use in the case," which includes depositions that are introduced into evidence (at trial or in support of a motion for summary judgment), as well as transcripts that may be included in an appellate record, and which may include the cost of the copy as well as the cost of the original transcript.21 Where the "necessarily obtained for use in the case" standard is met, the prevailing party can also recover costs of depositions used solely for discovery.22

  • fees for witnesses (28 U.S.C. § 1920(3)): Fees for witnesses include all fees payable under 28 U.S.C. § 1821, which include the daily attendance fee (§ 1821(b)), travel expenses (§ 1821(c)), and a subsistence allowance (§ 1821(d)).23 Fees for expert witnesses above the statutory cap are not allowable.24

  • fees for exemplification and copies "necessarily obtained for use in the case" (28 U.S.C. § 1920(4)): Courts generally allow photocopying expenses for documents served on or produced to the opposing party (including discovery documents) or documents filed with the court, but not for photocopies for the party's own use.25 "Exemplification" may also include the costs of photographs and other similar evidence, as well as a computerized multimedia presentation.26

  • docket fees under 28 U.S.C. § 1923 (28 U.S.C. § 1920(5)): These fees are generally de minimis, and include $20 on trial or final hearing; $5 on discontinuance of a civil action; $5 on motion for judgment; and $2.50 for each deposition admitted into evidence.27

          Costs that are not taxable include travel costs for attorneys, computerized litigation expenses such as computer disks and condensed transcripts, computer research, postage, and courier service.28

          To recover costs, the trial attorney must ensure that all copies of court reporters' bills for transcripts and all witness expense forms are saved.

          Because taxable costs become part of the judgment, the trial attorney can use the discovery procedures listed in Rule 69 as well as the judgment collection remedies contained in 28 U.S.C. to assist in collecting them. Where the trial attorney obtains a largely uncollectible judgment, it is unlikely that the Government's costs will be collected. In most full-payment refund cases (and many other cases), however, the costs are likely to be collectible from the losing party.

          If fees and costs are awarded to the Government under Rules 11, 16, 26, or 37 during the course of the litigation and have not already been collected, the trial attorney should be sure to include language to that effect in the final judgment for the underlying tax, so that it is clear that the total judgment includes these sanctions.

          As an alternative to the Tax Division collecting costs pursuant to judgment collection procedures, the IRS can–pursuant to I.R.C. § 6673(b)–assess and collect (in the same manner as a tax) sanctions, attorneys' fees, and court costs awarded to the Government in tax cases. To accomplish this, the trial attorney should send the IRS the appropriate form and a certified copy of the judgment. See Exhibit 6 for a copy of the form to be used for this purpose.

D. Ten-Percent Surcharge for Costs of Collection

          Section 3011 of the FDCPA authorizes the United States to recover a surcharge of "10 percent of the amount of the debt" in order "to cover the cost of processing and handling the litigation and enforcement under this chapter of the claim for such debt." The § 3011 surcharge is recoverable in any affirmative collection suit brought by the United States, including all tax collection suits, counterclaims, erroneous refund suits, failure-to-honor-levy suits, and I.R.C. § 3505 suits that result in a money judgment. The surcharge is applicable whenever the Government has availed itself of one of the pre- or postjudgment collection tools provided under subchapters B or C of the FDCPA (28 U.S.C. §§ 3101-3206).29 The mere filing of an abstract of judgment under 28 U.S.C. § 3201, however, is not an "action or proceeding" within the meaning of the § 3011 surcharge provision, and thus, does not entitle the Government to the surcharge. The surcharge is not recoverable if the United States recovers an attorney's fee in connection with enforcement of its claim or if the law governing the claim provides for the recovery of similar costs. 28 U.S.C. § 3011(b).

          The surcharge should be mentioned in any presuit letter in a collection case; and in complaints and counterclaims seeking money judgments, the trial attorney should consider pleading that the United States seeks the § 3011 surcharge if required to use any of the remedies in subchapter B or C of the Federal Debt Collection Procedures Act (28 U.S.C. § 3101-3206). See §§ II.C., II.D., supra (discussing surcharge in presuit letters and complaints/counterclaims).

Because the surcharge is a statutory addition to the underlying liability, the final judgment should not be amended in order to specify that the debtor is liable for it. If an FDCPA collection tool has been used, however, no satisfaction of judgment should be issued unless and until the surcharge has been fully paid or otherwise compromised.

In computing the surcharge, the trial attorney should use 10 percent of the amount of the largest total unpaid judgment liability, including interest and other statutory additions, at any time during the life of the debt after the judgment was entered. The extra ten percent, to the extent it is collected after the full amount of the underlying judgment (including all accrued interest and penalties) has first been collected, should not be paid to the IRS and applied to the delinquent taxpayer's account. Rather, amounts collected for application to the ten-percent surcharge should be paid to the Department of Justice in the same manner as is done with attorneys' fees, sanctions, and other similar amounts collected by the Department.

E. Stays of Collection

1. Automatic Stay of Collection of a Judgment

Fed. R. Civ. P. 62(a) provides, in pertinent part, that "no execution shall issue upon a judgment nor shall proceedings be taken for its enforcement until the expiration of 10 days after its entry."30 Thus, no action may be taken to enforce a money judgment by execution or other proceedings for a period of ten days, commencing on the day judgment is entered as provided in Rule 58.

2. Motions to Stay Collection of a Judgment

Fed. R. Civ. P. 62(b) provides that if a timely motion is filed under the provisions of Rules 50, 52(b), 59 or 60, the court, in its discretion, may also stay execution of–or any proceeding to enforce–a judgment pending the disposition of the motion.31

If no stay has been granted by the district court, action to collect the judgment can be taken when the ten-day automatic stay expires, irrespective of the filing of an appeal. If the judgment is satisfied by execution or other post-judgment creditor remedies, the appeal by the judgment debtor is not rendered moot.32 On the other hand, voluntary satisfaction of a judgment, by either a debtor or a co-debtor, will render an appeal moot.33

3. Posting a Bond as a Condition of a Stay

When the ten-day automatic stay expires, Rule 62(d) allows a party appealing a money judgment to prevent enforcement of the judgment by furnishing an appropriate supersedeas bond or other security.34 The purpose of the supersedeas bond is to preserve the status quo of the parties during appeal, thereby avoiding the risk of restitution if the appeal is successful while, at the same time, protecting the rights of the judgment creditor against any loss resulting from the failure to enforce the judgment during the pendency of an unsuccessful appeal.35 Although approval of a supersedeas bond precludes further proceedings to enforce the judgment, the other legal consequences of the entry of judgment are not suspended. The bond may be given at or after the time of filing the notice of appeal, and the stay is effective upon court approval of the supersedeas bond.36 Any application for approval of a supersedeas bond must ordinarily be addressed first to the district court, under 62(d), and, if unsuccessful, then to the appellate court.37

As the terms and conditions of the bond will determine the extent of the surety's liability, the bond should clearly provide for payment of the full amount of the judgment, together with estimated costs on appeal and interest in the event the judgment is affirmed, in whole or in part, or if the appeal is dismissed.38

F. Judgment Lien

1. United States District Courts

A judgment lien against a judgment debtor's real property comes into existence only when a certified copy of the abstract of judgment is properly filed.39 FDCPA Section 3201(a) requires the filing to be made in the same manner as a notice of tax lien is filed under I.R.C. § 6323(f)(1) and (2). Thus, a certified copy of the abstract of judgment should be filed in the appropriate location(s) where real property of the judgment debtor is located. See § IV.D.1, infra, for discussion of the proper place to file a notice of federal tax lien pursuant to I.R.C. § 6323(f)(1) and (2). An abstract of judgment form, cover letter to the United States Attorney, and instructions are attached as Exhibit 7. (In those districts where the United States Attorney's Office is unwilling to assist us, the Tax Division should handle filing the abstract.)

Because a judgment lien, unlike a tax lien, attaches only to real property of the judgment debtor, a judgment lien can be obtained against personal property only by seizing the property under the judgment enforcement procedures. See 28 U.S.C. § 3203.

Creation of a judgment lien is especially important in those cases in which the underlying liability of the judgment debtor is not secured by a federal tax lien, for example, liability under I.R.C. §§ 3505 and 6332(c) and liability for erroneous refunds. A judgment lien is effective for 20 years and, with court approval, may be renewed once for an additional 20 years.40 28 U.S.C. § 3201(c).

2. The Court of Federal Claims

Section 2508, 28 U.S.C., provides specifically for the entry of judgments rendered by the Court of Federal Claims in favor of the United States and provides that such judgments shall be enforceable in the same manner as judgments entered by a district court.

3. United States Bankruptcy Courts

In most of the Tax Division's litigation in the bankruptcy courts, we do not obtain a money judgment of the sort that can be collected using the judgment collection procedures contained in the Judicial Code (28 U.S.C.). Most bankruptcy litigation handled by the Tax Division involves disputes as to the amount, relative priority, or dischargeability of the IRS claim. Once these disputes are resolved by a court order or settlement we can generally close our file, since responsibility for monitoring collection of any amounts owed by the bankruptcy debtor (and assessing them if they have not yet been assessed) rests with the IRS.

On occasion, however, we may obtain a money judgment in a bankruptcy court. A money judgment entered by a bankruptcy court is a judgment within the meaning of 28 U.S.C. § 3002(8), since the 28 U.S.C. § 3002(2) definition of a "court" includes a bankruptcy court. Accordingly, the collection tools of the FDCPA (see § IV.E.3, infra) are available to collect such a judgment. These collection remedies cannot be used, however, if the Bankruptcy Code § 362 automatic stay is still in effect, unless the bankruptcy court lifts the stay at our request pursuant to § 362(d).

13. Otis v. City of Chicago, 29 F.3d 1159, 1163 (7th Cir. 1994).

14. Sometimes courts mistakenly enter judgment incorporating the interest rate for non-tax judgments in favor of the United States that is set forth at 28 U.S.C. § 1961(a). These mistakes should be corrected immediately, either by calling the judge's scheduling clerk and asking for change, or, if necessary, filing a formal motion.

15. Fed. R. Civ. P. 54(d) provides that "costs shall be allowed as of course to the prevailing party unless the court otherwise directs."

16. This form is available on Informs Filler.

17. Any party objecting to the clerk's taxation of costs must object within five days of the clerk's action. Fed. R. Civ. P. 54(d)(1).

18.Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437 (1987). In addition to the categories discussed above, § 1920(6) also allows taxation for the compensation of court-appointed experts and interpreters. This category will generally be inapplicable to Tax Division cases, however.

19. See 28 U.S.C. § 2412(a)(2).

20. See 10 James W. Moore, Moore's Federal Practice § 54.103[3][a] (Matthew Bender 3d ed.), § 54.103[3][b] nn. 17, 18 (citing cases).

21. Id., § 54.103[3][c][i] nn. 29, 30 (depositions introduced into evidence) (citing cases); Id., § 54-103[3][e] (transcripts included in appellate record); see also Alflex Corp. v. Underwriters Labs., Inc., 914 F.2d 175 (9th Cir. 1990) (per curiam) (original plus copy of deposition taxable).

22. See10 Moore, supra, § 54.103[3]]c][i] & n. 32 (citing cases).

23. See 10 Moore, supra, § 54.103[3][c][ii] - [iv] (citing cases).

24. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437 (1987).

25. E.g., Haagen-Dazs Co. v. Double Rainbow Gourmet Ice Creams, Inc., 920 F.2d 587 (9th Cir. 1990) (taxing photocopying expenses for discovery documents not offered into evidence); see also McMillan v. United States, 891 F. Supp. 408, 415 (W.D. Mich. 1995) (citing cases);10 Moore, supra, § 54.103[3][d] & n.70 (citing cases). In Northbrook Excess & Surplus Ins. Co. v. Proctor & Gamble Co., 924 F.2d 633, 643 (7th Cir. 1991), the court concluded that a description of photocopying costs was not required to be "so detailed as to make it impossible economically to recover photocopying costs." Some courts also set maximum per-page photocopying charges. See, e.g., Yasui v. Maui Elec. Co., 78 F. Supp. 2d 1124, 1129 (D. Haw. 1999) (maximum charge of $.10 per page).

26. Maxwell v. Hapag-Lloyd Aktiengesellschaft, 862 F.2d 767, 770 (9th Cir. 1988) (photographs); AM Props. v. Town of Chapel Hill, 202 F. Supp. 2d 451, 454-55 (M.D. N.C. 2002) (same); see also10 Moore, supra, § 54.103[3][d] & nn. 71-77 (citing cases).

27. See also 10 Moore, supra, § 54.103[3][f] (citing cases).

28. See, e.g., AM Properties v. Town of Chapel Hill, 202 F. Supp. 2d 451, 455 (M.D.N.C. 2002) (travel expenses of counsel); Northbrook Excess & Surplus Ins. Co. v. Proctor & Gamble Co., 924 F.2d 633 643 (7th Cir. 1991) (computerized litigation costs); Yasui v. Maui Elec. Co., 78 F. Supp. 2d 1124, 1129 (D. Haw. 1999) (citing Embotelladora Agral Regiomontana v. Sharp Capital, Inc., 952 F. Supp. 415 (N.D. Tex. 1997) (computer research, postage, courier costs) See also 10 Moore, supra, § 54.103[3][c][i] & nn.41.1 & 41.2 (citing cases).

29. See, e.g., U.S. v. Sackett, 114 F.3d 1050 (10th Cir. 1997); Rendleman v. Shalala, 864 F. Supp. 1007, 1012-13 (D. Ore. 1994); United States v. Smith, 862 F. Supp. 257, 263-64 (D. Hawaii 1994); United States v. Maldonado, 867 F. Supp. 1184, 1199 (S.D.N.Y. 1994); United States v. Mauldin, 805 F. Supp. 35 (N.D. Ala. 1992).

30. See generally 12 Moore's Federal Practice, Ch. 62 (Matthew Bender ed.), (stay pursuant to Fed. R. Civ. P. 62); 20 Moore's, Ch. 308 (stay pursuant to Fed. R. App. P. 8(a)); 11 Charles A. Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure Civil 2d, § 2901 et seq. (1995).

31. Fed. R. Civ. P. 62(b)

32. See Cahill v. New York, N.H. & H.R.R., 351 U.S. 183 (1956) (per curiam); In re Latham, 823 F.2d 108 (5th Cir. 1987).

33. E.g., Out of Line Sports, Inc. v. Rollerblade, Inc., 213 F.3d 500, 502 (10th Cir. 2000) (voluntary payment by debtor); Schiller v. Penn Central Trans. Co., 509 F.2d 263, 266 (6th Cir. 1975) (voluntary payment by codebtor). See also 13A Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure, § 3533.2, at 246 & n.36 (2d ed. 1984).

34. Numerous courts have held that a district court maintains discretion to authorize security other than a supersedeas bond. See, e.g., Olympia Equipment Leasing Co. v. Western Union Tel. Co., 786 F.2d 794, 796 (7th Cir. 1986) (supersedeas bond requirement is inappropriate where it would put judgment debtor's other creditors in "undue jeopardy"); Federal Prescr. Serv., Inc. v. American Pharm. Ass'n, 636 F.2d 755, 757-58, 760-61 (D.C. Cir. 1980) (district court has "sound discretion" to authorize "partially secured or unsecured stays" in "appropriate cases" where judgment creditor's interest is "not unduly endanger[ed]"). Staying execution of a judgment without requiring any security may constitute an abuse of discretion, however. See, e.g., Geddes v. United Fin. Group, 559 F.2d 557 (9th Cir. 1977) (district court erred in staying execution for one year based on judgment debtors' inability to pay judgment).

35. Poplar Grove Planting and Ref. Co. v. Bache Halsey Stuart, Inc., 600 F.2d 1189 (5th Cir. 1979).

36. See Fed. R. Civ. P. 62(d).

37. See Fed. R. App. P. 8(a).

38. See Fed. R. Civ. P. 65.1 for the procedure to enforce the surety's liability should such action be required.

39. 28 U.S.C. § 3201. Before enactment of § 3201, in order to obtain a judgment lien it was necessary to register or record the judgment in accordance with state law applicable to state judgments, pursuant to 28 U.S.C. § 1962, which prior to amendment in 1990 (by Section 3627 of the FDCPA) applied to all judgments obtained in federal district court, including judgments obtained by the United States.

40. Contrast the judgment lien with I.R.C. § 6322, which provides that a federal tax lien is not merged in a judgment and continues until satisfied or rendered unenforceable by reason of lapse of time. See United States v. Bank of Celina, 823 F.2d 911 (6th Cir. 1986); United States v. Overman, 424 F.2d 1142 (9th Cir. 1970); United States v. Hodes, 355 F.2d 746, 749 (2d Cir. 1966), cert. dismissed, 386 U.S. 901 (1967).
Updated April 6, 2015