Technical Support will review the pre-approval report noted in IRM 4.15.2.4.1.3. The review includes determining if:

The jeopardy/termination approval report and package is prepared as noted in IRM 4.15.2.4.1.3 and IRM 4.15.2.4.1.4. Form 2644 takes the place of Form 5344. The case is not prepared as a case under examination. Forms 4665, 4318, and 886–A are not required. However, under the jeopardy/termination provisions, a notice of deficiency must be issued to the taxpayer who is subject to the jeopardy/termination assessment. An examination is completed and the case assembled according to case file assembly procedures. The case is then closed on an expedite basis for issuance of the notice of deficiency.

After review, if Technical Support agrees with the pre-approval report, it will be returned to the examiner. Technical Support should accompany the examiner to Counsel for their pre-review by Counsel.

After review, if Technical Support does not agree with the pre-approval report, it will be returned to the examiner. Technical Support will provide the examiner with the reasons for not agreeing with the report.

Technical Support will review the approval report noted in IRM 4.15.2.4.1.3.6 and the approval package noted in IRM 4.15.2.4.1.4. The review will cover the items in the review of the pre-approval report noted in IRM 4.15.6.3.1 and the following:

After review, if Technical Support agrees with the approval report and package, the Technical Support Manager will sign each Form 2644 in the appropriate area. The approval report and package will be returned to the examiner.

After review, if Technical Support does not agree with the approval report and package, the approval report and package will be returned to the examiner. Technical Support will provide the examiner with the reasons for not agreeing with the report and package.

If Exam management disagrees with Technical Support, the case will be discussed with the Technical Support Manager.

Under IRC 6861(b), if the jeopardy assessment is made before any notice of deficiency is mailed with respect to the jeopardy assessment, a notice of deficiency is required to be mailed to the last known address of the taxpayer within 60 days of the date of the assessment.

The deficiency amount stated on the notice of deficiency will be either the amount of the assessment, or the reduced amount determined by Appeals, if the notice of deficiency is not issued before the Appeals determination. An increased amount may require another jeopardy assessment.

Under IRC 6851(b), if a termination assessment is made, a notice of deficiency is required to be mailed to the last known address of the taxpayer, for the taxpayer's full taxable year, within 60 days after the later of:

The deficiency amount stated on the notice of deficiency can be greater than, less than, or the amount of the termination assessment.

If the taxpayer does not file a return, the notice of deficiency must be sent within 60 days after the due date of the return. In Perlowin v. Sassi, 711 F.2d 910 (9th Cir. 1983), aff'd in relevant part, rev'd on other grounds, the Court of Appeals concluded that the District Court was correct in its interpretation of IRC 6851(b). The District Court interpreted the statute to mean that if no return is filed, the IRS should issue a deficiency notice within 60 days of the due date of the tax return. The deficiency is calculated in accordance with the procedures for calculating deficiencies in jeopardy assessments where the taxpayer has failed to file a return.
Example 1: Exam terminates the taxpayer's period from January 1, 1997 through November 1, 1997. The taxpayer does not file a tax return for 1997. The taxpayer did not file any extensions. When preparing the notice of deficiency, the period will be for the full taxable year, January 1, 1997 through December 31, 1997. The notice of deficiency must be mailed on or before June 14, 1998.
Example 2: Exam terminates the taxpayer's period from January 1, 1997 through November 1,1997. The taxpayer files a timely request for extension of time to file returns until August 15, 1998. The taxpayer does not file a tax return for 1997. When preparing the notice of deficiency, the period will be for the full taxable year, January 1, 1997 through December 31, 1997. The notice of deficiency must be mailed on or before October 14, 1998.

Return Filed — A notice of deficiency is required where the correct tax liability is determined and a deficiency exists (the correct tax liability is greater than the tax shown on the return). Amounts collected under a termination assessment are not treated as payments that would be considered for purposes of determining the amount of a deficiency.
Example 1: A termination assessment is made against taxpayer A, a calendar year taxpayer, in the amount of $18,000. The termination assessment is made for the period from January 1, 1997 through November 1, 1997. On or before April 15, 1998, taxpayer A files a Form 1040 showing an income tax liability for the full year 1997 of $10,000. The area director determines taxpayer A's liability for tax for 1997 is $16,000. A notice of deficiency in the amount of $6,000 must be sent to taxpayer A on or before June 14, 1998. Assuming the area director had collected the $18,000 assessed, $2,000 may be refunded to taxpayer A. No refund will be made until the case is closed.
Example 2: A termination assessment is made against taxpayer A, a calendar year taxpayer, in the amount of $18,000. The termination assessment is made for the period from January 1, 1997 through November 1, 1997. The taxpayer files a timely request for extension of time to file returns until August 15, 1998. On July 31, 1998, taxpayer A files a Form 1040 showing an income tax liability for the full year 1997 of $10,000. The area director determines taxpayer A's liability for tax for 1997 is $16,000. A notice of deficiency in the amount of $6,000 must be sent to taxpayer A on or before September 29, 1998. Assuming the area director had collected the $18,000 assessed, $2,000 may be refunded to taxpayer A. No refund will be made until the case is closed.

No Return Filed — If the taxpayer fails to file a return, the tax per return is taken as zero. A notice of deficiency is required to be issued since the correct tax liability normally will be greater than zero. Amounts collected under a termination assessment are not treated as payments that would be considered for purposes of determining the amount of a deficiency.

Under IRC 6867, if a possessor of cash jeopardy/termination assessment is made, IRC 6851 and 6861 are followed. Therefore, a notice of deficiency is required to be mailed under the applicable jeopardy or termination procedures. The possessor of the cash is treated as the taxpayer for purposes of the notice of deficiency procedures, and the possessor of the cash is sent the notice of deficiency.

A new taxable entity is created with a temporary TIN for the possessor of cash. The use of the temporary TIN enables separate tax liability treatment for the possessed cash and avoids any effect on the possessor's personal individual tax liability, which remains separate from the IRC 6867 assessment.

All documents requiring entity information must use "(Possessor's Name) as Possessor of Certain Cash" as the name line.

All 90-day letters prepared in jeopardy/termination cases will be reviewed by Area Counsel before issuance. Allow enough time for Counsel review during the 60-day period. All 90-day letters will comply with the IRS Restructuring and Reform Act requirements.

Failure to issue the notice of deficiency within the 60-day period nullifies the jeopardy/termination assessment (for filed returns, and may nullify the assessment for nonfiled returns), and entitles the taxpayer to an injunction restraining further collection of taxes and a return of property that had been seized.

Even if a notice of deficiency is not issued within the time prescribed by the jeopardy/termination provisions, the Service can still make a determination of the correct tax liability as long as a notice of deficiency is sent to the taxpayer within the time prescribed by IRC 6501.