This is an assessment made by the IRS of the additional tax owed by a taxpayer who underpaid without resorting to the usual review procedures because the taxing officer believes that delay may jeopardize collection of the claim. The deficiency is assessed immediately and it includes additional amounts, additions to tax, and interest. The assessment is made for a prior year where the filing date, including extensions, has passed. The legal authority for jeopardy assessments is: IRC 6861 for income, estate, gift, and certain excise taxes;IRC 6862 for taxes other than income, estate, gift and certain excise taxes; and IRC 6867 for "Possessor of Cash."
Jeopardy assessments of tax are to be used sparingly. They are to be reasonable, appropriate, and limited to amounts which can be expected to protect the government. All jeopardy assessments have a common characteristic: prior to assessment, a determination is made that collection will be endangered if regular assessment and collection procedures are followed. The mere fact that a taxpayer is the subject of a special fraud investigation is not sufficient grounds for a jeopardy assessment. When it is determined that a taxpayer has little or no assets to offset the assessment, jeopardy assessments will generally not be pursued. Each jeopardy assessment must receive the personal approval of the area director.