Judgment Enforcement - an essential part of the Division

(SANEPR.com) April 15, 2009 -- Judgment enforcement is an essential part of the 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 enforcement laws. This Tax Division Judgment Collection Manual sets forth the Tax Division's collection policies, explains the laws authorizing judgment enforcement, 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 judgment enforcement. 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

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

B. Referral or Retention

After initial judgment enforcement 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 judgment enforcement. 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 judgment enforcement 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 enforcement 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, judgment enforcement 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 judgment enforcement. 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 judgment enforcement standpoint, and many of the cases may have substantial judgment enforcement potential.

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

C. Using paralegals
Successful judgment enforcement 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 judgment enforcement tasks, such as initial demand letters and initial judgment enforcement interrogatories.

D. Reporting activities

As explained in Part VI, infra, it is essential that attorneys and paralegals accurately and promptly report their judgment enforcement and judgment enforcement activities on TaxDoc, the Division's automated case management system. Additionally, paralegal and attorney time spent on judgment enforcement matters should be reported on TaxDoc time reports as “judgment enforcement 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 enforcement.

For further information regarding Judgment Recovery, Judgment Collection or the Statute of Limitations as it applies to Judgment Recovery please visit www.jbalington.com