Not much is written on the internet apart from the dry text of the Internal Revenue Manual about suits to reduce tax assessments to judgment. This little-known (and rarely used?) tax collection avenue is available to the IRS to effectively extend the 10-year statute of limitations on administrative tax collection. While this sounds like it would be incredibly common whenever the 10-year statute of limitations is about to expire to the dismay of taxpayers dodging the IRS, it doesn’t seem to be routinely used. Perhaps the amount of work involved in initiating this action, coordination with the Department of Justice, or lack of clear assets from which to collect are reasons why this type of government suit is infrequently used in tax collection.
The following is a contribution from a guest author to our tax blog.
Some taxpayers who owe the IRS become familiar with the statute of limitations for collection and adopt the uncomfortable strategy of dodging the IRS until the 10-year deadline expires. However, those taxpayers can theoretically be adopting a strategy that will not bear fruit should the IRS via the DOJ initiate a lawsuit to reduce a tax assessment to judgment.
Extends The Statute of Limitations
A reduction of a tax assessment to judgment suit is generally instituted to extend the statute of limitations for collection. It prevents the statute of limitations on collection from running when collection cannot be accomplished by administrative methods (levy and sale) within the administrative collection statute of limitation of 10 years. The suit is brought in the following circumstances:
- The collection statute will shortly expire.
- All administrative remedies have been exhausted.
- There is reason to believe that the IRS can collect in the future through after-acquired assets, inheritance, or other assets.
The suit to reduce a tax assessment to judgment can be authorized for the tax liability to stay enforceable. The period for the collection by levy does not expire unless the tax liability is satisfied or becomes unenforceable. Hence, a timely proceeding in court for collecting a tax must be commenced within 10 years to keep the tax liability enforceable.
Burden of Proof
The burden of proof for the timely assessment and collection suit to reduce a tax assessment to judgment lies on the government. The government usually proves the assessment, its timeliness, and amount by submitting a Certificate of Assessments and Payments to the court. Once the timely assessment is established, the burden is shifted to the taxpayer to prove that the assessment is erroneous by a preponderance of the evidence.
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