States Use Jeopardy Assessments as Effective Collection Mechanism

States Use Jeopardy Assessments as Effective Collection Mechanism

There are situations in which state tax authorities determine that ordinary assessment and collection efforts will be ineffective. Although most practitioners do not experience application of the jeopardy assessment provisions often, it is important to maintain an awareness of the provisions, since the circumstances in which they are applied contain many pitfalls for practitioners

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Almost all of the states statutorily provide for some kind of jeopardy assessment... [J]eopardy assessments are not the usual method of assessing a taxpayer's obligation to the state. They require a "finding" by the state that the collection of the tax will be difficult. The type of finding necessary appears in statutory codes in two common forms. The first form.. grants states the authority to issue a jeopardy assessment whenever normal efforts to collect taxes owed to the state would "be jeopardized by delay." The second type... provides that jeopardy assessments may be issued when a specifically listed statutory finding exists.

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Although some states do not require that notice of a jeopardy assessment be given a taxpayer, most have some kind of notice requirement.

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Generally, states are able to begin the collection process as soon as the notice of demand has been made and refused. Processes typically available to states include the issuance of a tax warrant, filing of a lien, garnishment, attachment-distress sales, and the levy and sale of seized property. Often, states have the option of pursuing more than one of these remedies.

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The seizure and sale provisions of certain states, such as New Jersey, New York, and Utah, allow for the immediate sale of seized property, but only under certain circumstances.

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