5.9.5. Opening a Bankruptcy Case

(1) Internal Revenue Manual (IRM) 5.9, Bankruptcy and Other Insolvencies, contains the Service’s position, procedures, information, instructions, guidance, and references concerning bankruptcy cases, stockbroker insolvencies, receiverships, assignments for the benefit of creditors, corporate dissolutions, and bulk sales.

(1) The Insolvency program operates within the guidelines of the US Bankruptcy Code (11 USC) and the Federal Rules of Bankruptcy Procedure.

(2) IRM 5.9.3.1.2, Authority, and IRM 5.9.3.1.3, Responsibilities, also contain Insolvency caseworkers’ authority and responsibilities in the Insolvency program.

(1) IRM 5.9.1, Overview of Bankruptcy, provides a list of titles and responsibilities with an explanation of their roles and authority within the Insolvency program.

(2) The Director, Specialty Collection - Insolvency (SCI) is responsible for program oversight.

(1) IRM 1.4.51.8.3, Case Management Tools, IRM 5.9.12, Insolvency Automated Processes, and IRM 5.9.16, Insolvency Case Monitoring, contain a list of required reports for caseworkers and managers to utilize for inventory management and review of case inventories. These sections also include the frequency and purpose of each report.

(2) National quality reviews and consistency reviews are conducted on a consistent basis. See IRM 1.4.51.16.1, NQRS, IRM 5.13.1.4, Embedded Quality - Field Quality Review Process, and IRM 21.10.1, Quality Assurance - Embedded Quality (EQ) Program for Accounts Management, Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support. See also IRM 1.4.51.16.2, EQ Consistency Reviews, for more information.

(3) Operational and program reviews are conducted on a yearly basis. See IRM 1.4.51.17.2, Operational Review, and IRM 1.4.51.17.5, Program Reviews, for more information.

(1) Managers are required to follow program management procedures and controls addressed in IRM 1.4.51.5.2, Reviews (Overview), IRM 1.4.51.15, Controls, and IRM 1.4.51.16, Quality.

(2) Caseworkers and managers utilize the Automated Insolvency System (AIS) for case management, assignment, and documentation of all insolvency and non-bankruptcy insolvency cases. Access and permissions to AIS are restricted. See IRM 5.9.3.2, Automated Insolvency System (AIS).

(1) A glossary of terms used by Insolvency can be found in Exhibit 5.9.1-1, Glossary of Common Insolvency Terms.

(2) Common acronyms acceptable for use in the Automated Insolvency systems (AIS) history are listed Exhibit 5.9.1-2, Acronyms and Abbreviations.

(3) Additional acceptable acronyms and abbreviations are found in the ReferenceNet Acronym Database, which may be viewed at: http://rnet.web.irs.gov/Resources/Acronymdb.aspx.

(4) Some acronyms used specifically in this IRM sections are listed below:

(1) Procedural guidance on insolvencies can be found throughout IRM 5.9, Bankruptcy and Other Insolvencies.

(2) The US Bankruptcy Code (11 USC).

(3) Bankruptcy Rules (Federal Rules of Bankruptcy Procedure).

(4) Local Bankruptcy Court Rules.

(5) Applicable Case Law.

(6) Document 13219 , AIS User Guide.

(7) My SB/SE Insolvency/Bankruptcy page: http://mysbse.web.irs.gov/collection/insolvency/default.aspx.

(8) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see : https://www.irs.gov/taxpayer-bill-of-rights

(9) Certain issues in a bankruptcy case may be referred to Associate Area Counsel or directly to the U.S. Attorney’s Office (USAO). Within this IRM, the term "Counsel" refers to Associate Area Counsel or the USAO, whichever is appropriate. For more information on referrals, see the following subsections in IRM 5.9.4, Common Bankruptcy Issues:

• IRM 5.9.4.15, Referrals - Representing IRS in Bankruptcy Court

• IRM 5.9.4.15.1, Direct Referrals

• IRM 5.9.4.15.2, Referrals to Counsel (Non-Direct Referrals)

• IRM 5.9.4.15.3, Significant Bankruptcy Case Referrals

(1) Lack of Notice. If the Service is not receiving timely notice of bankruptcy filings, FI should determine the reason notices are not being received. The issue should be resolved by FI at the local level with the court or with debtors' attorneys. Counsel’s involvement may be required. In rare instances, the matter might justify elevation through proper channels to the National Office for contact with the Administrative Office of the United States Courts, when the problem lies with the court.

1. Field Insolvency (FI). If FI groups identify a problem with notices not being timely loaded onto AIS, they should contact the CIO to determine if the delay lies with the Service, with the courts, or with the debtors' attorneys.

2. Centralized Insolvency Operation (CIO). If CIO units identify a noticing problem, the unit lead should contact the leads of the CIO units responsible for loading new cases to AIS. If the delay lies with the courts or debtors' attorneys and not with CIO processing, the lead should determine the jurisdictions involved and alert the appropriate FI group so remedies can be initiated at the local level.

(2) Unnoticed Chapter 7 No Asset Cases. IRM 5.9.17.10(4),Chapter 7 Discharge Actions, Lack of Notice in Chapter 7 No Asset Cases, explains proper actions to take when the Service is not noticed in a discharged Chapter 7 No Asset case and the debtor has dischargeable liabilities.

(3) No Notice or Late Notice in Asset Cases. In the individual or joint asset case, taxes are not discharged when the Service did not receive notice of the bankruptcy filing within sufficient time to file a timely proof of claim before the expiration of the bar date. Additionally, taxes are not discharged when the Service did not receive notice of the bankruptcy filing because the debtor failed to include IRS on the bankruptcy schedules and statements (11 USC 523(a)(3)). The provision in Bankruptcy Code 523(a)(3) does not apply if the Service otherwise had timely notice or actual knowledge of the bankruptcy filing. Based on the procedures used by the IRS to create and file a proof of claim, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The provision applies to individual or joint Chapter 7 Asset cases, individual or joint Chapter 11 and Chapter 12 cases, as well as Chapter 13 cases. See IRM 5.9.17.8.9, Procedures for Processing Bankruptcy Discharges when the IRS Received No Notice or Late Notice in the Asset Case, and IRM 5.9.13.7.1, Bar Dates, Late Filed Claims, for additional information.

(1) Correct IRS Mailing Address. Each bankruptcy court's mailing matrix must list the correct mailing address for the Internal Revenue Service.

1. One National Address for the Mailing Matrix. With few exceptions, correspondence from debtors or attorneys should be directed to the mailing address of the CIO for correspondence "without remittance." The mailing address is:

   Note: Internal Revenue Service P.O. Box 7346 Philadelphia, PA 19101-7346

2. Trustee Checks. Trustees should mail all Chapter 13 and Chapter 7 checks to the CIO at:

   Note: Internal Revenue Service P.O. Box 7317 Philadelphia, PA 19101-7317 Checks from Chapter 9, 11, or 12 trustees or debtors-in-possession should be sent to the FI group handling the account.

3. Checks Mailed from FI to CIO. Chapter 13 or 7 trustee checks received in FI offices should be shipped by overnight courier to the CIO street address accompanied by Form 3210, Document Transmittal. The Form 3210 must list each check separately by the check number and the trustee's last name. The street address for the CIO is:

   Note: Internal Revenue Service Mail Stop 5-Q30-1332970 Market Street Philadelphia, PA 19104-5016 Attention: Payment Team

4. Checks from Non-Debtor Spouses. Non-debtor spouses should be directed to send their remittances to the Campus assigned to their geographic location. When checks from non-debtor spouses are received at a FI office, the FI caseworker must complete a Form 3244, Payment Posting Voucher, for each payment and send the vouchers along with the remittances to the appropriate Campus Support group via overnight courier. The CIO will provide payment posting information to the Campus Support function in accordance with local guidelines.

   Note: Form 3210, Document Transmittal, listing all payments separately by TIN must accompany remittances forwarded to the Campuses. The "Who/Where" tab on SERP provides Campus addresses for payment processing.

(1) No Discharge. Discharges are not granted to partnerships in Chapter 7 cases or to partnerships that liquidate in Chapter 11 cases. So, initial case reviews and actions taken during the pendency of these bankruptcies may vary from the treatment taken on other entities that file under these chapters.

(2) Types of Partnerships. Partnerships are one of two types: general or limited. General partnerships are comprised of members who are all general partners. Limited partnerships are comprised of one or more general partners and one or more limited partners.

(3) General Partnerships. General partners may be individuals, corporations, limited liability companies (LLCs), or other partnerships. General partners are individually responsible for any federal tax liabilities or penalties related to federal taxes incurred by the partnership. Assets of general partners are not part of the bankruptcy estate. In most cases, collection can proceed against the assets of the general partner(s) without violating the automatic stay while the partnership itself is under bankruptcy protection. It is the position of the Service that IRS will not proceed with collection against the general partners during the pendency of the bankruptcy case unless extenuating circumstances exist, such as a jeopardy situation or an imminent CSED. Guidance from Counsel should be sought before taking collection action against assets of the general partners while the partnership bankruptcy case is still open.

(4) Limited Partnerships. A limited partnership has at least one general partner and any number of limited partners. As mentioned above, general partners are responsible for the federal tax liabilities and federal tax related penalties incurred by the partnership. Generally, limited partners are not responsible for tax liabilities and tax related penalties of the partnership. Thus, collection actions cannot be taken against assets of the limited partners for application to the tax obligations of the partnership, whether or not that partnership is in bankruptcy.

(5) Exception for Limited Partners. A limited partner can still be liable to a third party for conduct that has injured that third party. Therefore, if the Service establishes a basis for assessing a TFRP against the limited partner, the Service may be able to collect from the limited partner through that assessed TFRP. The Insolvency caseworker must determine whether a limited partner is liable for the TFRP, keeping in mind the ASED for the TFRP is not suspended while the partnership is in bankruptcy. For additional information see:

• IRM 5.17.7, Legal Reference Guide for Revenue Officers, Liability of Third Parties for Unpaid Employment Taxes,

• IRM 5.7.3, Trust Fund Compliance, Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty (TFRP),

• IRM 5.7.4, Trust Fund Compliance, Investigation and Recommendation of the TFRP, and

• IRM 5.9.3.10, Debtors’ Delinquent Accounts, Trust Fund Recovery Penalty, and subsections.

(6) Closing Actions. IRM 5.9.17.11, Closing Chapter 7 or Liquidating Chapter 11 Partnerships, provides procedures for closing partnerships that filed Chapter 7 or Chapter 11 liquidating bankruptcies.

(1) Case Classifications that Alert Caseworkers to Actions Needed in a Case. There are several case classifications on AIS that alert caseworkers to actions that must be addressed during the closure of a bankruptcy case. The case classifications also alert caseworkers to situations that must be addressed during the pendency of the bankruptcy case. When appropriate, case classifications should be added to the case on AIS, regardless of the bankruptcy chapter. Previously, AIS did not allow multiple case classifications. In older cases, the "PDSC ISSUE" case classification alerted caseworkers that multiple issues were present in a case which had to be addressed during case closure. Due to AIS enhancements, there may now be multiple case classifications present in a case. In either situation, caseworkers working or closing a case must look for special guidance in the "Summary History" to work the case. (See IRM 5.9.5.4.2, Summary Histories, through IRM 5.9.5.4.4, Chapter 7 Summary Histories, for additional information.) The chart below lists case classifications which identify issues that must be addressed during case closure or require special actions during the pendency of the bankruptcy case. The chart includes all case classifications currently available on AIS. Refer to Exhibit 5.9.1-2, Acronyms and Abbreviations, for the acronyms used in this chart:

(1) Summary Histories. Cases are frequently reassigned during the pendency of the bankruptcy case. The reassignment may be from one FI caseworker to another FI caseworker. The reassignment may also be from the CIO to FI or from FI to the CIO. To alert caseworkers in either function to actions that may be required during case closure, or special circumstances in the case, caseworkers must enter a "Summary History" when issues are present that affect processing of the case. For easy identification in the AIS history, "*****SUMMARY*****" must be entered in all capital letters at the beginning of the "Summary History". Issues that may affect final disposition or the processing of the case include, but are not limited to:

• Potential fraud

• Liabilities that are not provided for by the debtor's plan

• Unusual plan provisions that affect discharge

• Reinstatement of an installment agreement (IRM 5.9.4.20, Installment Agreements and Bankruptcy, IRM 5.9.17.24, Addressing Prior Installment Agreements When Closing a Case, and Exhibit 5.9.17-2, Regular Installment Agreement Reinstatements, through Exhibit 5.9.17-5, Installment Agreement Cannot Be Reinstated)

• Refund turnover orders

• Pending Exam or Underreporter deficiency, or re-assessment of a TC 291 or TC 301

• A discharge was entered in a prior bankruptcy case and the time between the filing of the two bankruptcy petitions makes the debtor ineligible for a discharge in the current bankruptcy case per BAPCPA (IRM 5.9.5.7.1(5), Systemic Identification in Serial Filer Cases, Discharge Limitations, Exhibit 5.9.5-3, Allowable Elapsed Time Between Bankruptcy Filings and Discharges, and IRM 5.9.10.3.2(7), Processing Chapter 13 Bankruptcy Cases, Aspects of the Initial Case Review, Discharge Limitations)

• Issues that impact the ASED, CSED, automatic stay, or tolling in the current case because the debtor is a serial filer

• There is a criminal restitution assessment in a case, a "CRIMREST" case classification is present, and any special instructions regarding discharge or non-dischargeability of liabilities (IRM 5.9.4.22, Criminal Restitution Assessments, IRM 5.9.4.22.1, Working Criminal Restitution Cases, and IRM 5.9.17.8.8, Discharge and Restitution Assessments)

• IRS did not receive notice in an asset case or notice was not timely, a "NoNotice" case classification is present in the case, and instructions regarding dischargeability of the liability (IRM 5.9.17.8.9, Procedures for Processing Bankruptcy Discharges when the IRS Received No Notice or Late Notice in the Asset Case)

(1) Summary Histories in Chapter 13 Cases. Prior to the transfer of the case from FI to the CIO, the FI caseworker must enter a "Summary History" in the case. FI must also enter a "Summary History" in a case when the case must remain in FI because issues in IRM 5.9.1.4(5), The Role of Insolvency, Complex Issues, are present. The "Summary History" allows for the easy identification of issues that must be addressed during case closure and during the pendency of the bankruptcy case. FI must enter *****SUMMARY***** in upper case letters when entering the "Summary History" on AIS. Sample minimum summaries are included in IRM 5.9.10.6.1(4), Processing Chapter 13 Bankruptcy Cases, Field Insolvency (FI) Actions Prior to Case Transfer. In addition to the items listed in IRM 5.9.10.6.1(4) and in IRM 5.9.5.4.2, Summary Histories, caseworkers must include:

• Issues that impact the ASED, CSED, automatic stay, or tolling because the debtor is a serial filer (IRM 5.9.5.7, Serial Filers, including instructions to input a TC 520 cc 6X using the confirmation date upon confirmation of the plan.

• Instructions for the application of plan payments to criminal restitution assessments, or guidance regarding discharge, when there is a criminal restitution assessment present.

  Note: Cases with a criminal restitution assessment are identified by a "CRIMREST" case classification.

• Instructions regarding the non-dischargeability of taxes when a determination has been made that the debtor willfully evaded the payment of the taxes and the "WILLFUL" case classification is present in a case.

(2) General Transfer Criteria. FI will transfer a case to the CIO when all proofs of claim have been acknowledged, the CPM Screen on AIS has been loaded and verified, all follow-ups on the AIS Letter Screen have been closed, and there are no complex or non-complex issues that require the case to remain in FI. (See IRM 5.9.1.4, The Role of Insolvency, and IRM 5.9.10.6, Transfer of Chapter 13 Cases from Field Insolvency (FI) to the Centralized Insolvency Operation (CIO), for additional information.) If the case meets Chapter 13 streamlined criteria, the FI caseworker must ensure that a "≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡" case classification is added to AIS prior to transfer. The CIO will monitor for confirmation of the plan and maintain the case in the CIO inventory until dismissal or discharge unless issues arise that require transfer to FI prior to dismissal or discharge. Upon dismissal or discharge, the CIO will take closing actions on the dismissed or discharged case. If any of the issues listed in IRM 5.9.5.4.2, Summary Histories, or (1) above are present, the issues must be included in the "Summary History" in the Chapter 13 case. Additional issues unique to the Chapter 13 case are addressed below.

(3) Transfer of the Open Chapter 13 Case. When a Chapter 13 case is transferred from FI to the CIO prior to confirmation, a "Summary History" must be entered in the case prior to the transfer. The issues listed above must be addressed. Additionally, if the case is 180-days old or older at transfer, the FI caseworker must check PACER to determine if the plan is still unconfirmed. The "Summary History" must state, "*****SUMMARY***** - FI reviewed PACER and the case not yet confirmed. Transferred to CIO to monitor for confirmation."

(4) FI Transfer to CIO After Discharge. FI will transfer a discharged case to the CIO for closure when the discharge is received while the case is assigned to FI and there are no issues that require the case to remain in FI. FI will ensure that "SI SUP DIS REQUEST - SI" or "RI CH7&HARDSHIPCH13 RI" is entered in the method of closure field on AIS. The method of closure is determined by the type of discharge the debtor received in the Chapter 13 case - a discharge upon completion of the plan or a hardship discharge. FI will also ensure that the date of discharge is entered on AIS. The case may also be transferred for closure when discharge was denied in the case. "DD DISCHARGE DENIED" is the method of closure used when discharge is denied. (See IRM 5.9.17.8.3, Discharge Denied, for additional information.) "No Notice" is entered as the method of closure in the case when the liability is non-dischargeable because the IRS was not noticed timely in the case. (See IRM 5.9.17.8.9, Procedures for Processing Bankruptcy Discharges when the IRS Received No Notice or Late Notice in the Asset Case.)

(1) Summary Histories in Chapter 7 Cases. The CIO and FI share responsibilities in the processing of Chapter 7 cases. (See IRM 5.9.6.10, Chapter 7 Case Assignments, and subsections, for more information.)

• Chapter 7 No Asset (NA) business cases usually remain at the CIO during the entire pendency of the bankruptcy case. The CIO takes closing actions on the cases without the involvement of FI. As the Chapter 7NA business case remains at the CIO during the pendency of the case, there are no "Summary History" requirements in the Chapter 7NA business case.

• Chapter 7NA cases of individual or joint debtors may transfer between the CIO and FI for investigations of exempt, abandoned, or excluded property (EAEP). FI may also investigate cases for exceptions to discharge for fraud or willful evasion. (See IRM 5.9.6.10.3, Large Dollar 7NA Case Assignments, and IRM 5.9.17.5, Exempt, Abandoned or Excluded Property (EAEP), and subsections, for additional information.)

• Certain Chapter 7 Asset (7A) cases are transferred from FI to the CIO for closing actions or to monitor for dismissal or discharge.

(2) Chapter 7NA Individual Cases. When a Chapter 7NA individual or joint case meets the dollar criteria determined by the Director, SCI, the CIO "screens" the case to determine if an EAEP investigation is needed. If there are dischargeable liabilities and EAEP is located during the review, the case is transferred from the CIO to FI for a further investigation. Additionally, if there are dischargeable liabilities, no EAEP is located, and the Unpaid Balance of Assessment (UBA) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, the case is transferred from CIO to FI. FI determines if there are any exceptions to discharge due to fraud or the willful evasion exception to discharge. (See IRM 5.9.6.10.3, Large Dollar 7NA Case Assignments, and IRM 5.9.17.5, Exempt, Abandoned or Excluded Property (EAEP), through IRM 5.9.17.5.4.1, Thrift Savings Plan (TSP), for additional information.) Upon completion of the investigation by FI, the case is reassigned to the CIO to monitor for dismissal or discharge and for closing actions unless FI determines that there is collection potential from EAEP after the discharge. Cases with collection potential from EAEP remain in FI until the case is discharged and FI has concluded all collection action from the EAEP. For additional information, see the following:

• IRM 5.9.6.10.3(3), Large Dollar 7NA Case Assignments, FI Investigation

• IRM 5.9.17.5.1(4), Pre-discharge Review for Exempt, Abandoned or Excluded Property (EAEP) in Chapter 7 No Asset Cases, Cases Transferred from CIO to Field Insolvency (FI)

• IRM 5.9.17.5.4(2), Insolvency Levy Procedures for Excluded Retirement Plans, Large Dollar Chapter 7 No Asset Cases

• No Collection Potential from EAEP after the Discharge — The FI caseworker must enter "No EAEP" and "7N - NQRS" case classifications on AIS. The "No EAEP" classification alerts the CIO to proceed with closing actions at discharge. This includes adjusting any dischargeable liabilities. A "Summary History" is required in the case prior to transfer to CIO.

  Example: *****SUMMARY***** - EAEP investigation completed. No collection potential from EAEP at case closure. CIO, proceed with closing actions upon discharge.

• There is EAEP Available and Collection Potential after the Discharge — The FI caseworker must enter "Exempt" and "7N - NQRS" case classifications on AIS. The "EXEMPT" classification on AIS lets others know that dischargeable liabilities must not be adjusted until collection is pursued from the EAEP. To assist caseworkers with actions taken at case closure, a "Summary History" must be entered in the case.

  Example: *****SUMMARY***** - EAEP investigation completed. Excluded retirement plan located with collection potential after discharge. Plan # 12345, Employee's Retirement Group, 1234 Anywhere St., Big City, State 11111. Do not discharge any dischargeable liabilities until collection actions have been exhausted.

  Reminder: These cases remain in FI until all collection actions from EAEP have concluded.

• The FI Caseworker Determined that Taxes are Excepted from Discharge Due to the Willful Evasion Exception to Discharge or Fraud — The FI caseworker must enter "WILLFUL" and "7N - NQRS" case classifications on AIS. The "WILLFUL" classification will let the CIO know that liabilities are non-dischargeable. There is no need to send the case back to FI for a further investigation. The FI caseworker must enter a "Summary History" in the case prior to transfer to the CIO.

Example: *****SUMMARY**** - EAEP investigation completed. Liabilities non-dischargeable. Taxpayer willfully evaded payment of the tax. CIO, do not abate any liabilities when discharge is received.

• The FI Caseworker Determined that there is No Evidence of Fraud or Willful Evasion — The FI caseworker must enter "NO WFTP" and "7N - NQRS" case classifications on AIS. The "NO WFTP" classification will let the CIO know that they can proceed with abatement of dischargeable liabilities when the discharge is received. There is no need to send the case back to FI for a further investigation after the discharge. The FI caseworker must also enter a "Summary History" in the case prior to transfer to the CIO.

  Example: *****SUMMARY***** - Current information indicates no matters of interest ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡. CIO to proceed with closing actions at discharge.

(3) Chapter 7 Asset (7A) Individual Cases. The Chapter 7 Asset case filed by an individual or joint debtor may be transferred from Field Insolvency (FI) to the CIO once the initial case analysis has been completed, all proofs of claim have been acknowledged, and there are no issues that require the case to remain in FI. The CIO monitors for dismissal or discharge in the case. Once the dismissal or discharge is received, CIO takes closing actions in the case. (See IRM 5.9.6.10.1(3), Field Insolvency (FI) Case Assignments, Chapter 7A Individual Cases.) Additionally, discharged cases may be transferred from FI to the CIO when the case is discharged while assigned to FI. (See IRM 5.9.17.10, Chapter 7 Discharge Actions, for additional information.)

• When an individual 7A case is transferred from FI to the CIO prior to discharge, the "Summary History" must state, "*****SUMMARY***** - No issues exist. CIO take action when Dismissal/Discharge Received."

• When an individual 7A case is transferred from FI to the CIO after discharge, the "Summary History" must state, "*****SUMMARY***** - Discharge received and RI Input. Reassigned to CIO."

• Date notice was received,

• When the bar date expired,

• If notice was received prior to the expiration of the bar date,

• Any opinion received from Counsel on the case, and

• A statement that the liabilities are non-dischargeable for lack of timely notice.

(4) Chapter 7A Business Cases. The Chapter 7A business case of a corporation or Limited Liability Company (LLC) is transferred from Field Insolvency (FI) to the CIO for closure. Prior to transfer, the FI caseworker must complete an initial case review and ensure that all proofs of claim have been filed and acknowledged. Additionally, the FI caseworker must ensure that there are no issues, such as an unassessed TFRP, that requires the case to remain open. If the entity is a LLC, the FI caseworker must add a "LLC" case classification to AIS prior to transfer of the case so the CIO can easily identify the LLC. The FI caseworker must also add a "Summary History" that provides closing instructions for the CIO. See the following for additional information:

• IRM 5.9.6.10(2), Chapter 7 Case Assignments, Limited Liability Companies (LLCs)

• IRM 5.9.6.10.1(4), Field Insolvency (FI) Case Assignments, Chapter 7A Business Cases

• IRM 5.9.17.12, Closing Corporate Chapter 7 and Chapter 7 Limited Liability Companies (LLCs)

• IRM 5.9.17.12.1, Chapter 7 Single Member Disregarded Entity LLCs

(1) Internal Follow-Up - When an internal follow-up date is established, ensure case actions are taken within 30 calendar days of your set follow-up date.

(2) Letter 1714 Follow-Up - A 15-day, Automated Insolvency System (AIS) follow-up date should be established to coincide with the debtor’s response deadline as stated in Letter 1714, Request for Missing Tax Returns. (See Exhibit 5.9.4-1, Inputting Follow-up Dates, for steps in setting a follow-up date.) Upon follow-up, the caseworker must review the case to verify if the requested returns have been filed or if the debtor has provided pertinent information regarding the filing or non-filing of the delinquent returns. See IRM 5.9.13.2, Addressing Unfiled Returns, for more information. In some cases, the debtor will not respond to Letter 1714 . In those cases, the caseworker must contact the debtor or debtor’s attorney by phone to secure returns or return information. If contact with the debtor or the debtor’s attorney by phone does not bring the debtor into compliance, the caseworker should consider the appropriate next action which may include:

• Attendance at 341 hearing to secure the return(s);

• Creating an OI for a revenue officer to collect the return(s);

• Preparation of an IRC 6020(b) return(s);

• Referral to Counsel to dismiss/convert;

• Preparation of an estimated claim or allowing an existing estimated claim to stand.

(3) Deadline for a Taxpayer - The deadline given to a taxpayer or representative to comply with a request for information or action should be reasonable with respect to the information or action requested. When setting deadlines and consequences, ensure that sufficient time is calendared to carry out follow-up actions if the deadline is not met. See Exhibit 5.9.4-1, Inputting Follow-Up Dates, on the Automated Insolvency System (AIS).

(4) Taxpayer Missed Deadline - When a taxpayer or representative misses a specific deadline, initiate follow-up action within fifteen (15) calendar days unless special circumstances warrant a delay. Such circumstances should be clearly documented per IRM 5.9.5.4(1), Automated Insolvency System (AIS) Documentation, Case Histories.

(5) Extension Request - If the taxpayer requests an extension, use your discretion in granting it. Document your decision and its basis. See IRM 5.9.5.4(1), Automated Insolvency System (AIS) Documentation, Case Histories.

(6) Follow-up action should move the case forward. Remember to create and update a plan of action that moves your case toward resolution and to schedule simultaneous case actions where appropriate. Use follow-up reports as required in IRM 5.9.12, Insolvency Automated Processes and IRM 5.9.16, Insolvency Case Monitoring, to assist and guide you to work cases in your inventory. Follow-up actions include, but are not limited to, the following:

• Securing unfiled returns

• Plan Filing

• Post-petition Compliance

• Plan Monitoring

• Post-confirmation liabilities

• Court actions/outcomes

• Referral for motion to dismiss or convert

• Adjustment/closing actions

• Refunds

• TFRP/ASED

• Taxpayer deadlines

• Exam issues

• NFTL refile

• Objecting to a plan

• Amending a claim in response to Letter 1714, Request for Missing Tax Returns

• Sending a collection letter after discharge as part of EAEP

(7) Take follow-up actions simultaneously, as appropriate.

(1) Effects of Various Closing Codes. Bankruptcy closing codes used in conjunction with the TC 520 determine what the bankruptcy freeze will allow or restrict. The closing codes "freeze" the appropriate modules and alert all functions within the Service to cease all collection activity when a bankruptcy petition is filed. An exception is the TC 520 cc 84. The TC 520 cc 84 does not "freeze" modules but it is an indicator that Insolvency should be contacted for guidance prior to proceeding with any enforcement activity in the case.

(2) Compliance with Legal Requirements. Standing court orders and local rules or agreements that are present in some jurisdictions affect the processing of bankruptcy cases. This frequently includes the manner in which refunds and offsets are handled. The implementation of BAPCPA also affects the choice of closing codes for cases filed on or after October 17, 2005. Selection of the appropriate TC 520 closing codes by Insolvency helps the Service comply with the legal requirements of each judicial district and the provisions of BAPCPA.

(3) Updated Closing Codes. In anticipation of the passage of BAPCPA, eight new bankruptcy closing codes became available for use with the TC 520 in January of 2002. These closing codes added options for handling issues systemically. In particular, the new closing codes modified the –V freeze to allow for post-petition offsets of "mutual" pre-petition income tax credits to pre-petition income tax liabilities, as permitted by 11 USC 362(b)(26), in the post-BAPCPA case. The specific features of each of the updated closing codes are described in the table in paragraph (7), Table 2, below.

(4) Retirement of Some Existing Closing Codes. With the addition of the newer closing codes, some of the older closing codes were retired. IDRS no longer allows TC 520 inputs with closing codes 86, 87, 88, or 89. However, open cases with unreversed TC 520s with these closing codes continue to be processed by MF in accordance with the specifications below. Both sets of closing codes (the old and the new), and their effects and characteristics, are shown in Tables 1 and 2 below.

(5) TABLE 1 - 8X SERIES CLOSING CODES.

(6) 8X SERIES CLOSING CODES – Additional Information.

1. CC 81. Does not prevent assessments from posting to any module in the entity and does not affect the subsequent processing of modules that do not contain a TC 520 cc 81. It freezes the entity from all offsets and refunds. Shows alpha freeze of -W and IDRS status (ST) 72. A TC 520 cc 81 on a module extends the CSED on that module on IDRS.

2. CC 83. Freezes the entity from all offsets. Refunds will not be frozen on pre-petition and post-petition modules. IDRS shows an alpha freeze of -V and IDRS ST 72 on the module(s) where the cc 83 is input. The cc 83 extends the CSED on the module when a TC 520 cc 83 is input to the module on IDRS.

3. CC 84. Allows assessments, offsets, refunds, sends out standard notices, and generates LTS transcripts. It does not suspend the balance due account for the module to which it is input. IDRS shows an alpha freeze of -W. The IDRS status code does not change to ST 72. The TC 520 cc 84 does not extend the CSED on the module(s) with the cc 84 on IDRS. It alerts all Service employees to contact Insolvency before taking any enforcement action against the taxpayer.

4. CC 85. Does not prevent refunds when no balance due modules or balance due indicators are present in the entity. Otherwise, refunds and offsets are frozen. Shows alpha freeze of -V and IDRS ST 72. The cc 85 extends the CSED on the module when a TC 520 cc 85 is input to the module on IDRS.

5. CC 86. Allows assessments of all returns and adjustments but prevents issuance of all balance due notices except for one "information" notice. Refunds and offsets are not frozen. Shows alpha freeze of -V and IDRS ST 72. The cc 86 extends the CSED on the module when a TC 520 cc 86 is input to the module on IDRS.

6. CC 87. Allows all assessments but prevents the issuance of all balance due notices except one "information" notice. Systemic offsets are unaffected. Refunds are frozen. Shows alpha freeze of -V and IDRS ST 72. The cc 87 extends the CSED on the module when a TC 520 cc 87 is input to the module on IDRS.

7. CC 88. Freezes the entity from all refunds and offsets. Shows alpha freeze of -V and IDRS ST 72. The cc 88 extends the CSED on the module when a TC 520 cc 88 is input to the module on IDRS.

8. CC 89. Allows assessments but prevents the issuance of all balance due notices except one "information" notice. Prevents offsets. Refunds will be issued to the taxpayer. Often used in Chapter 13. Shows alpha freeze of -V and IDRS ST 72. The cc 89 extends the CSED on the module when a TC 520 cc 89 is input to the module on IDRS.

   Note: The freeze indicators used for bankruptcy (alpha -V and -W freezes) affect notices, offsets, refunds, and CSEDs, depending on the closing code used.

(7) TABLE 2 - 6X SERIES CLOSING CODES.

(8) Freeze Indicator. All closing codes in the 6X series have the -V freeze indicator. All TC 520 closing codes in the 6X series extend the CSED on the module where the TC 520 cc 6X is input. Section 11 of Document 6209, IRS Processing Codes and Information, gives additional information on closing codes.

(9) Prevention of Duplicate Refunds. Many TC 520 cc 6X closing codes allow for systemic offsets and the systemic generation of refunds. Do not prepare a Form 5792, Request for IDRS Generated Refund (GR), without determining which TC 520 closing codes are present on the account. Unless there is a TC 520 cc 81 present, the TC 520 cc 6X may allow for systemic generation of the refund. Preparing and submitting a Form 5792 can result in the issuance of a duplicate refund when the TC 520 cc 6X allows for the issuance of systemic refunds.

(10) Bankruptcy Litigation Location Code (BLLC). During the pendency of a bankruptcy case, caseworkers may need to manually change a TC 520 closing code (cc) on IDRS. This may be necessary due to changes in local court rules, because the taxpayer is a serial filer, etc. When changing a TC 520 closing code on IDRS, caseworkers must input a BLLC.

(1) TC 521. A TC 521 reverses a TC 520 and releases the litigation freeze. All of the TC 520 closing codes operate independently of each other. For example, a TC 521 cc 81 will not reverse a TC 520 cc 83 or a cc 67. A TC 521 with a 999 statistical indicator will reverse all open TC 520s in a module with cc 81, 83, or 85 through 89, and cc 60 through 67.

(2) TC 522. A TC 522 can be used to reverse a TC 520 when:

1. The TC 520 was input in error.

2. A mirrored MFT 31 and/or MFT 65 module has been created for a non-debtor spouse, the TC 520 must be reversed to allow correct computation of the CSED, or to prevent incorrect tolling in the event the non-debtor spouse files a bankruptcy petition.

3. The debtor is a serial filer in a case filed post-BAPCPA and the automatic stay never went into effect in the current case because there was no motion and order extending the stay. The TC 520 must be reversed to allow collection and to ensure the correct computation of the CSED. (See IRM 5.9.5.7, Serial Filers, below.)

4. A post-petition period has been protected by the stay due to the bankruptcy "freeze" code and the plan was not modified to provide for payment of that period.

(1) Identifying Potential Stay Issues. The Insolvency Interface Program (IIP) has been programmed to recognize and record previous bankruptcies for both stay issues and non-dischargeability issues. IIP systemically inputs a message on the AIS TIN table to advise Insolvency caseworkers of "Prior Bankruptcy Status". The messages used by IIP on the AIS TIN table are:

• "Prior to 10-17-2005" which denotes a current (case) docket where the petition date was prior to 10-17-2005 (pre-BAPCPA).

• "Prior bankruptcy less than 12 months" which denotes a current docket’s petition date was on or after October 17, 2005, and a prior bankruptcy was found that was filed on or less than 365 days before the current docket's petition date.

• "Prior bankruptcy greater than 12 months" which denotes a current docket’s petition date was on or after October 17, 2005, and a prior bankruptcy was filed more than 365 days before the current docket's petition date.

• "Prior bankruptcy less & greater than 12 months" which denotes a current docket’s petition date was on or after October 17, 2005, prior bankruptcies were found which were filed less than 365 days before the current petition date, and another prior bankruptcy was located that was filed more than 365 days before the current docket.

• "Multiple prior bankruptcies" which denotes that a current docket's petition date was on or after 10-17-2005, and more than one prior bankruptcy case was filed more than 365 days before the current docket.

• "No prior bankruptcy" which denotes no prior bankruptcies were located.

• "Exempt" which denotes the case is exempt from being checked by IIP.

(2) Caseworker Actions. The CIO is responsible for reviewing the Chapter 7 No Asset cases assigned to them when the case requires manual case actions. FI is responsible for reviewing cases assigned to them upon initial case review. When the case is assigned to FI, upon initial case review, if the Prior Bankruptcy Status field on the AIS TIN screen is anything except "No prior bankruptcy," the caseworker must determine if the previous bankruptcy(cies):

• was dismissed within one year of the current bankruptcy petition date under section 707(b) of the Bankruptcy Code.

• the caseworker must input a follow-up date for 45 days from the petition date to check the court's electronic records (case will remain in inventory),

• determine the status of the automatic stay (imposed/extended),

• follow the procedures in Exhibit 5.9.5-4, Common Processing Steps in Serial Filer Cases, Exhibit 5.9.5-5, Processing the Serial Filer Case When the Stay Terminates after 30 Days, or Exhibit 5.9.5-6, Processing the Serial Filer Case When No Stay Goes into Effect, and

• document the review and actions taken for effects on the current bankruptcy case.

(3) CSED Extension. IIP will input a TC 520 on master file balance due modules for all new bankruptcies regardless of any previous bankruptcies. If the court did not impose a stay on collection actions, or if the stay terminated on the 30th day in the current case, the caseworker must manually reverse TC 520s and input appropriate TC 520s in the serial filer case, when necessary. This will result in IDRS correctly calculating the CSED in the case. IDRS TC 520 cc 84 will not suspend the CSED. It will alert Service employees to contact Insolvency before taking any collection action because there is a bankruptcy case on the taxpayer and the Service may be limited in the pursuit of collection actions. The TC 520 cc 6X closing codes all extend the CSED on IDRS. In either instance, the case will remain open on AIS until dismissal, discharge, or non-discharge.

(4) Impact of the Serial Filer on Statutes. When the taxpayer is a serial filer and there is no order extending the stay, calculation of the Assessment Statute Expiration Date (ASED) and Collection Statute Expiration Date (CSED) may be impacted. Additionally, when the debtor is a serial filer, the calculation of tolling to determine proof of claim classification in a subsequent case may be impacted. The following chart explains the impact on statutes in the serial filer case.

(5) Discharge Limitations. The Bankruptcy Code limits how often a debtor can be discharged from certain chapters in bankruptcy. (See 11 USC 727(a)(9), 11 USC 1328(f), and Exhibit 5.9.5-3, Allowable Elapsed Time Between Bankruptcy Filings and Discharges.) When the prior bankruptcy status determined by IIP, as explained in paragraph (1) above, is anything except "No prior bankruptcy" in the Prior Bankruptcy Status field on the AIS TIN screen, caseworkers must review the prior bankruptcy(ies) to determine if the debtor is disqualified from discharge. If the caseworker determines the elapsed time between filings precludes a discharge upon case closure, the caseworker must input a "SERIAL" case classification on the "Classification" field on the AIS Taxpayer Screen and document the history with the reason the debtor's liabilities cannot be discharged. Then, the caseworker should consult Counsel to determine if other actions are required, such as court notification, in that jurisdiction. In explaining how to apply 11 USC 1328(f), most courts have held that eligibility for discharge in Chapter 13 cases depends on the petition date of the prior bankruptcy case and the petition date of the current bankruptcy case, as well as the type of prior bankruptcy case filed by the debtor. For additional information, see:

• IRM 5.9.10.3.2(7), Processing Chapter 13 Bankruptcy Cases, Aspects of the Initial Case Review, Discharge Limitations

• In re Sanders, 551 F.3d 397 (6th Cir. 2008)

• In re Bateman, 515 F.3d 272, 280 (4th Cir. 2008)

• In re Gagne, 394 B.R. 219, 230 (1st Cir. BAP 2008)

(6) Case Classification. When the debtor is a serial filer and there are issues in the case that impact the automatic stay, ASED, CSED, dischargeability, or tolling in subsequent cases, caseworkers must add a "SERIAL" case classification to AIS so the case can be easily identified and document the AIS case history why the case classification was added.

(1) NFTL Filed in Violation of the Stay. When FI or CIO identifies that a NFTL was filed in violation of the automatic stay, a withdrawal of the NFTL must be initiated expeditiously. See IRM 5.9.5.5, for additional information.

• Securing managerial approval to withdraw the NFTL,

• Requesting issuance of Form 10916, Withdrawal of Filed Notice of Federal Tax Lien,

  Caution: A Certificate of Release must not be used to withdraw a NFTL.

• Issuing Letter 4026, Notice of Lien Withdrawal, to the taxpayer,

• Issuing Letter 4711-I, Withdrawal Decision - Insolvency, to the taxpayer,

• Reversing the NFTL filing fees (TC 360) on IDRS, and

• Rescission of CDP rights, when appropriate.

Note: See IRM 5.12.9, Federal Tax Liens, Withdrawal of Notice of Federal Tax Lien, for additional guidance on NFTL withdrawals.

(2) NFTLs After Dismissal and Before an Order Vacating Dismissal. A NFTL may have been received as filed by the recording office after dismissal of a bankruptcy case. At a later date, the court may enter an order vacating the dismissal. In most instances, an order vacating dismissal does not reinstate the bankruptcy stay. Thus, the filing of the NFTL was not in violation of the stay when the NFTL was received as filed by the recording office after the dismissal. The NFTL should not be withdrawn. However, if the order vacating the dismissal contains language that reinstates the automatic stay, the stay is usually reinstated on the day the order vacating the dismissal is signed and entered on the court’s docket. Generally, a withdrawal should only be issued when the NFTL is recorded after an order is entered vacating dismissal and the order specifically reinstates the automatic stay. When it is unclear if the automatic stay is reimposed in a case, or the date of reimposition is unclear, the case should be referred to Counsel for advice. Referrals are subject to the tolerances established by local Counsel. See IRM 5.9.17.6.6, Orders Vacating Dismissal (Reinstatements), for additional information.

(3) Withdrawal of NFTL.© After the Insolvency manager has approved withdrawal of the NFTL, Insolvency will request that the Centralized Lien Operation (CLO) process the approved NFTL withdrawal. The withdrawal request can be input manually to ALS when the Insolvency caseworker has appropriate permissions on ALS. If not, the withdrawal can be requested by sending Form 13794 -W, Request for Withdrawal or Partial Withdrawal of Notice of Federal Tax Lien, to the CLO via secure email. (See IRM 5.12.9.6, Withdrawal of Notice of Federal Tax Lien, Approving the Withdrawal Request, for additional information.)

(4) Form 10916, Withdrawal of Filed Notice of Federal Tax Lien. The Form 10916 can be generated through ALS or manually prepared by Insolvency.

1. Systemic Generation: When Form 10916 is generated through ALS, the CIO prints and mails Part 1 of the Form 10916 to the recording office. The TC 583 and the appropriate definer code (DC) are systemically input to MF. Correspondence Production Services (CPS) prints Part 2 of the Form 10916 and mails Part 2 along with the Letter 4026, Notice of Lien Withdrawal, to the debtor at the most current address of the taxpayer known to ALS. Copies of the documents are not provided to Insolvency by CLO unless Insolvency requests a copy. Copies are available through ALS.(See IRM 5.12.9.6.3, Distribution of the Withdrawal Certificate.)

2. Manual Generation: If Insolvency manually prepares Form 10916, Insolvency is responsible for mailing the Letter 4026 along with Part 2 of Form 10916 to the debtor. Insolvency is also responsible for manually inputting the TC 583 with the correct DC to MF.

(5) Notice to NFTL Originator. As a courtesy, if a revenue officer (RO) originated the NFTL, the Insolvency caseworker requesting the withdrawal should notify the RO of the NFTL withdrawal. Notification can be through secure email, phone, or fax. If the NFTL was originated by ACS, Insolvency need not notify ACS of the withdrawal.

(6) Notice to Creditors. If the debtor submits a written request for copies of the NFTL withdrawal notice to be forwarded to any creditor or credit reporting agency, the Service must comply promptly with the debtor's request. See IRM 5.12.9.6.4, Notifying Third Parties of Withdrawal, for guidance on processing the taxpayer’s request to send a copy of the withdrawal form to a third party.

(7) NFTL Fees. When a NFTL is withdrawn because it was filed in violation of the stay, the NFTL filing fee (TC 360) must be abated. The Insolvency office requesting the withdrawal must request abatement of the NFTL filing fee following their standard procedures for adjustments.

(8) Withdrawal Decision Letter. The Insolvency office approving the withdrawal of the NFTL should send Letter 4711-I, Withdrawal Decision - Insolvency, to the debtor or POA when a NFTL is withdrawn. The letter advises the debtor that the NFTL is being withdrawn and that they will receive a separate copy of the withdrawal notice. The L4711-I is used to rescind the CDP hearing notice (IRM 5.9.5.9.1.1, Rescinding NFTL CDP Rights). It is also used to deny a request for withdrawal of a NFTL when the taxpayer is in bankruptcy and the NFTL does not meet withdrawal criteria.

(1) Timely Refiling of NFTLs. When the statutory period for collection has been extended or suspended in cases with older secured assessments, Insolvency caseworkers must make a determination if the Notice of Federal Tax Lien (NFTL) should be refiled.

1. A window of time exists for refiling NFTLs. That window begins nine years and 30 days after the date of the assessment and ends 10 years and 30 days after the date of assessment.

2. While the secured status of IRS is determined as of the bankruptcy petition date, refiling the NFTL prevents objections to the claim of IRS and ensures continuity of the priority established by the original NFTL filing when the IRS achieved secured creditor status.

3. If there is no possibility that a NFTL will expire prior to all activity related to a bankruptcy case being completed (both during the bankruptcy and post-discharge), or if the Service has no NFTLs for pre-petition periods, NFTL refiling need not be considered.

4. Each assessment shown on the NFTL has its own refile window. These windows may overlap. If the total liability including accruals on the assessment(s) within the refile window is de minimis (IRM 5.9.1-1, Glossary of Common Insolvency Terms), the NFTL should not be refiled. If the total liability is not de minimis, the NFTL should be refiled for the assessments within the refile window.

(2) NFTL Refile Criteria. Normally, refiling a NFTL by itself is not considered a violation of the automatic stay under 11 USC 362 because a lien is not being created; rather, the lien is being preserved. The following guidance must be followed in cases where the NFTL refile window is after the initial case review, during the pendency of the bankruptcy case, or immediately post-discharge:

1. No Equity. If the Service has not filed a secured claim, the NFTL should not be refiled unless Insolvency has determined the debtor has exempt, abandoned, or excluded property (EAEP) that will be pursued for collection after the discharge.

2. Amount Remaining on a Secured Claim. Except as provided in (d) below, if the secured claim has been paid in full, the secured claim will be paid prior to the expiration of the NFTL, or the amount remaining unpaid is de minimis, the NFTL should not be refiled. If the secured claim will not be full paid prior to the expiration of the NFTL (excepting a de minimis remaining balance due), the NFTL should be refiled.

3. Possible Distribution in Chapter 7 Cases. If a secured claim is filed and the distribution will most likely be after the NFTL expiration date, the NFTL should be refiled to prevent objections to the Service’s secured claim. However, if Insolvency inadvertently fails to refile the NFTL before distribution, the secured claim of the IRS should remain classified as secured. If distribution will occur prior to the NFTL expiration date, the NFTL should not be refiled unless the conditions in (d), below, apply.

4. Dischargeable Periods. If the Service is actively pursuing collection against exempt, abandoned, or excluded property (EAEP) after the discharge, and collection may extend beyond the NFTL expiration date, the NFTL should be refiled. A follow-up date must be input on AIS to coincide with the NFTL refile window to ensure the NFTL is refiled prior to expiration.

Note: A NFTL should be refiled if there has been a referral to Counsel for the taxes underlying the lien, unless Counsel agrees otherwise.

(3) Insolvency NFTL Refile Reviews. NFTL refile determinations must be made on all Chapter 7 Asset, Chapter 7 No Asset Large Dollar, Chapter 11, Chapter 12, and Chapter 13 bankruptcy cases during initial case reviews. For additional information on NFTL refiling determinations in bankruptcy cases, see the following IRM references:

• IRM 5.9.6.11.1(3)(f), Aspects of the Initial Case Review in the Large Dollar 7NA Case

• IRM 5.9.6.11.2(3)(f), Aspects of the Initial Case Review in the 7A Individual Case, NFTL Refile Determinations

• IRM 5.9.6.11.3(3), Initial Case Review of the 7A Business Case by FI

• IRM 5.9.8.4.2(9), Aspects of the Initial Case Review in the Chapter 11 Case, NFTL Refile and Adequate Protection

• IRM 5.9.9.3.2(4), Processing Chapter 12 Bankruptcy Cases, Aspects of the Initial Case Review, Notice of Federal Tax Lien (NFTL) Refile Determinations

• IRM 5.9.10.3.2(8), Initial Case Review for Chapter 13 Bankruptcy, Aspects of the Initial Case Review, NFTL Refile Determinations

• IRM 5.9.17.5.3, Exempt, Abandoned or Excluded Property (EAEP), Addressing Lien Issues

• The following list summarizes when additional NFTL refile reviews must be conducted:

1. Chapter 7 Asset Distributions. NFTL refile reviews must occur the earlier of the notification of the discharge by the court or the NFTL refile window. If a NFTL refile is needed at a future date to protect the Service's secured status, a follow-up date must be input on AIS to coincide with the refile window. The caseworker must ensure that the NFTL is refiled prior to expiration.

2. Chapter 11 and Chapter 12 Cases. NFTL refile reviews must be conducted during the refile window time frame. The caseworker must schedule a follow-up to ensure the NFTL is refiled prior to expiration.

3. Exempt, Abandoned, or Excluded Property (EAEP). NFTL refile reviews must be conducted during the initial case review by the FI caseworker when the case is being reviewed for collection potential from EAEP. If a NFTL refile is needed, a follow-up date must be input on AIS to coincide with the refile window to ensure the NFTL is refiled prior to expiration.

(4) ALS Actions. After Insolvency has determined that a NFTL must be refiled, the NFTL refile request must be input on ALS by the operation (CIO or FI) that identifies the NFTL refile requirement. Unique circumstances may arise when a NFTL refile is in the best interest of the government and refiling is not covered by the information in paragraph (2) above. Caseworkers may refile NFTLs in those cases after receiving managerial approval.

(5) Documentation. When Insolvency caseworkers complete a NFTL refile review, they must document the AIS history with findings of that review and annotate all actions taken when refiling a NFTL. Such documentation may become important if issues later arise concerning the Service's secured claim, NFTL refiling issues, and possible ensuing litigation.

(1) Notice of Federal Tax Lien (NFTL) Filing by Field Insolvency (FI). Generally, Field Insolvency (FI) will make NFTL filing decisions on the specific cases in the bullet list below following the instructions in IRM 5.12.2.3, Notice of Federal Tax Lien Filing Determination (Pre-filing Considerations), IRM 5.12.2.3.1.1, Affordable Care Act’s (ACA) Shared Responsibility Payment (SRP) Exception, and IRM 5.12.2.4, Determination Criteria for Do-Not-File or Deferring the NFTL Filing. If none of the do not file or defer criteria apply ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ file a NFTL in:

• Dismissed cases (IRM 5.9.17.6.7, NFTL Filing Determinations after Dismissal).

• Chapter 12 cases of individuals (IRM 5.9.9.10.3(8), Post-petition Liabilities in Chapter 12 — Individual Cases, Notice of Federal Tax Lien (NFTL)).

• Chapter 11 cases of individuals who filed bankruptcy pre-BAPCPA and cases of entities other than individuals who filed Chapter 11 at any time. (IRM 5.9.8.19.4.1(1)), Post-Confirmation Tax Liabilities of the Non-individual Debtor or Individual Debtor (Pre-BAPCPA), Tax Debts Arising After Confirmation). Generally, a NFTL should not be filed for post-confirmation liabilities prior to discharge in the individual bankruptcy case filed post-BAPCPA without consulting Counsel first. (IRM 5.9.8.19.4.2(3)(c), Post-Confirmation Tax Liabilities of the Individual Debtor (Post-BAPCPA), Collection Considerations, Notice of Federal Tax Lien (NFTL))

• When a single member disregarded entity LLC files bankruptcy and the single member is not in bankruptcy. This requirement will generally apply to employment tax liabilities incurred for periods prior to January 1, 2009, and to excise tax liabilities incurred for periods prior to January 1, 2008, where the single member is liable for such tax liabilities of the LLC. (IRM 5.9.17.12.1, Single Member Disregarded Entity LLCs)

(2) NFTL Filing Considerations. In all NFTL filing situations, FI caseworkers should:

• Ensure contact with the taxpayer meeting the criteria in IRM 5.12.2.2, Taxpayer Contact, has been completed. Then, follow the instructions in IRM 5.12.2.3, Notice of Federal Tax Lien Filing Determination (Pre-filing Considerations), through IRM 5.12.2.3.2, Determination Requirements. Caseworkers may still wish to contact the debtor to request full payment and warn of the possible filing of a NFTL in an attempt to resolve the case without the need to file the NFTL.

• Verify that the automatic stay is not in effect for the periods included on the NFTL.

• Verify that the periods included on the NFTL are not otherwise included in a confirmed plan and that the plan does not prohibit taking any collection actions on the periods included.

• Determine whether or not a sound business reason exists to justify filing a NFTL.

• Document the AIS history explaining the decision to file, or to refrain from filing, a NFTL; as well as, a description of all NFTL filing actions taken.

(1) Bankruptcy Functional Responsibilities. Other operations within the Service have been advised to contact the CIO when they are advised of an identity theft issue on a case that is currently in bankruptcy. CIO caseworkers handle IDT issues for Chapter 7 No Asset cases assigned to their inventory. The CIO will direct all other identity theft issues to FI offices. The FI offices where the cases are assigned are responsible for proper resolution of the identity theft claims. If an IDT issue arises on a Chapter 13 or a Chapter 7 Asset case while the case is assigned to the CIO, the case will be reassigned to FI for resolution.

(2) Insolvency Actions. Insolvency may encounter unique situations when the taxpayer is in bankruptcy. Actions taken on the Insolvency case will depend on whether or not there is a balance due on the debtor's account or if the account in question had a refund or credit balance. Generally, in working possible identity theft cases, caseworkers should:

1. Ask for IDT substantiation to be provided to Insolvency, unless the debtor has already provided it. Supporting documentation is valid for three years.

2. Conduct internal research to see if you can determine if the debtor is a victim of IDT. (See IRM 5.1.28.7, Making an Identity Theft Determination, and subsections.) It does not matter if the debtor, bankruptcy trustee, or debtor’s attorney identified the potential IDT. If you can determine that IDT occurred, request any adjustments needed in the case and request input of the IDT indicator codes. Receipt of IDT substantiation documentation is not required. Treat the case as IRS identified IDT.

3. Monitor for receipt of the IDT substantiation documentation when you cannot determine through internal research that IDT occurred and IDT substantiation documentation is required..

4. Take whatever action is required in the case based on whether IDT occurred and if IDT substantiation documents are received, when required. This includes requesting any adjustments needed on accounts because of IDT and requesting input of the appropriate IDT indicator codes.

   Note: See IRM 5.9.5.12.1.1 through IRM 5.9.5.12.1.3 for additional information.

• The debtor is deceased or

• The debtor is unwilling to provide the substantiation because he/she is receiving the benefit of the refund from the IDT return.

(3) Consultation with Counsel. Before attempting to resolve an IDT issue, determine if the trustee or debtor's attorney filed an objection to the claim or a motion to determine tax liability. If the tax period involving the IDT issue is listed on the claim, or is being considered as part of the motion to determine tax liability, do not work the IDT issue without first coordinating with Counsel. Coordination with Counsel is required as the IDT issue is already being raised in a court proceeding.

(4) Referral to Taxpayer Advocate Service (TAS). In cases where the IDT issue is being litigated in the bankruptcy court, it is not appropriate to refer the case to TAS. TAS has no authority to intervene in the litigation. However, taxpayers have a right to a fair and just tax system which means they have the right to seek TAS assistance if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels. Therefore, in all other cases, consider whether the taxpayer should be referred to TAS. If the taxpayer is experiencing a financial hardship under TAS criteria 1 - 4 due to a tax-related IDT issue, prepare and submit Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order). Or, the taxpayer may contact TAS directly. (See IRM 13.1.7.2.1, TAS Case Criteria 1—4, Economic Burden.) If the taxpayer meets TAS criteria 5 - 7, you should refer the case to TAS pursuant to IRM 13.1.7.2.2, TAS Case Criteria 5 – 7, Systemic Burden. Systemic burden cases are those for which an IRS process, system, or procedure has failed to operate as intended, and as a result the IRS has failed to timely respond or resolve a taxpayer issue. In either instance, if the taxpayer requests to contact TAS directly, advise the taxpayer to call (877) 777-4778, toll-free, or go to https://www.taxpayeradvocate.irs.gov/.

(5) AIS History. In all instances, the caseworker must document the AIS history with all actions taken in the IDT case. Additionally, caseworkers must open an "Iden Theft" case classification on AIS. The case classification must remain open until the IDT issue is resolved.

(1) Introduction. Just as any taxpayer may be a victim of Return Preparer Fraud or Misconduct (RPM), a debtor in bankruptcy may be a victim of RPM. Refer to IRM 25.24, Return Preparer Misconduct Program, in addition to this subsection, when dealing with a case that may involve RPM. When you become aware that a debtor is a victim of RPM, encourage the victim to report the misconduct to other federal, state, and local agencies. See IRM 1.2.24.2, Policy Statement 25-2, Return Preparer Misconduct, for the Service’s policy on RPM.

(2) Return Preparer Fraud or Misconduct (RPM). A debtor becomes a victim of RPM when a tax return preparer completes a return for the debtor and without the debtor’s knowledge, makes changes to the return. The return changed without the debtor’s knowledge may result in an improper refund to the preparer or to a third party. In some instances, the debtor may even receive a portion of the improper refund or the improper refund may be issued to the bankruptcy trustee because of a return turnover order. The debtor may not know that there is an issue until the IRS contacts them about the return well after the refunds have been issued. In this instance, the debtor is a victim of RPM regardless of whether the refund was issued to the debtor, the bankruptcy trustee, the preparer, or another third party.

(3) Example of Return Preparer Fraud or Misconduct (RPM). An example of RPM is when the debtor visited and/or was in contact with a return preparer. The debtor authorized the preparer to file a return. The tax data on his or her return (exemptions, income, expenses, deductions, credits, etc.) was altered after the debtor signed the return. Or, the return otherwise includes items that the debtor did not authorize.

(4) Return Preparer Fraud or Misconduct (RPM) Substantiation. If a debtor or debtor’s representative states that the debtor is a victim of RPM, ask the debtor to submit the following substantiation within a reasonable amount of time:

1. Form 14157, Return Preparer Complaint, completed by the debtor.

2. Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, completed and signed by the debtor (at least one spouse must sign the form when the return is filed as married filing joint).

3. Debtor must provide the return preparer name and address.

4. A signed, valid tax return of the taxpayer (as intended to be filed) submitted with the claim.

5. For Category 3 and 4 refunds, only, an official report from a law enforcement agency.

   Example: Police Department, State Attorney General, Criminal Investigation, or Treasury Inspector General for Tax Administration (TIGTA)

   For additional information on Category 3 and 4 refunds, see IRM 25.24.1.1.4(1)(i)3, Category 3: Authorized filing, Altered return information and Taxpayer Requesting Additional Refund, and IRM 25.24.1.1.4.(1)(i)4, Category 4: Misdirected Refund Only and Taxpayer Requesting Additional Refund.

• Tax year(s) involved,

• Return preparer’s first and last name, address, and

• A statement describing the preparer misconduct and theft of refund. The following items are things that can be requested from the taxpayer or the representative. However, the taxpayer should still be assisted even if these items are not received:• Cover letter (including the tax return) received from the tax return preparer when the return was prepared.• Form 8879, IRS e-file Signature Authorization, with signatures or evidence that it was received from the tax preparer.• Copy of the negotiated check the taxpayer gave to the preparer for payment of services.• Copy of the "refund" check the taxpayer received from the preparer.• Credit card statement reflecting a charge in the preparer’s name for the payment of services.• Receipt from the preparer, reflecting a fee for the preparation of a tax return for the year in question.• Copy of paper check(s) reflecting the amount received by paper check from the preparer or bank, if applicable.• E-mail or text messages exchanged between the taxpayer and the preparer concerning the tax return preparation.• Affidavit of the person who hosted or sponsored the preparer (e.g., services provided by a preparer in the church basement - the church minister could provide an affidavit with details about when the tax return preparation services were offered and that the taxpayer participated in the event).• Copy of bank statement(s) reflecting the refund amount received by direct deposit, if applicable.• Bank statement(s) showing that the refund was not deposited into the taxpayer’s account.• Statement from the bank where the refund was deposited where the taxpayer had no ownership interest in the account.• Copies of additional documents to support the claim.

(5) Determination. When a taxpayer is in bankruptcy, the Insolvency caseworker must determine if RPM has occurred. If the debtor states that they are not required to file a return, or that the income on the return was not theirs, check IDRS cc IRPTR to verify the debtor’s claim. Actions taken in the case depend on if RPM occurred or did not occur. Be sensitive to the adverse impact that being a victim of RPM may have on the debtor.• Denial of RPM Complaint — If you have determined that RPM did not occur, advise the debtor that you have reviewed their complaint and their account does not support RPM. Advise them that our records show that the additional information reported on their tax return is valid. DITA will issue the Claim Disallowance Letter until a claim denial letter is developed for use in Field and Specialty Collection.• RPM Confirmed — If you have determined that RPM did occur, take the following actions:

1. If a Notice of Federal Tax Lien (NFTL) was filed, and the entire balance due covered by NFTL is due to RPM, request a Certificate of Release under IRC 6326, erroneous NFTL provisions pursuant to IRM 5.12.3.9, Erroneously Filed Notice of Federal Tax Lien. These releases contain a statement that the filing was erroneous and are requested through Specialty Collection Advisory. Advisory also issues Letter 544, Letter of Apology - Erroneous Filing of Notice of Federal Tax Lien. At the debtor’s written request, a copy of the release and letter of apology may be furnished to creditors or credit bureaus. Instruct the debtor to provide the names, mailing addresses, and permission to disclose the information.

2. If levies were issued on the affected tax modules, and they were not released during the initial Insolvency Interface Program (IIP) processing of the case, release levies on the affected modules.

3. Complete and route Form 3870, Request for Adjustment, with specific instructions on actions needed to correct the debtor’s account (see below). Do not attach IDRS prints to Form 3870.

4. Address any Category D erroneous refunds on the Form 3870 sent to DITA. See Step 6 in Exhibit 5.9.5-7, Debtor States Identity Theft (IDT), for additional information.

(6) Preparing Form 3870 to Adjust Accounts with Return Preparer Misconduct (RPM). Once the claim is verified, the Insolvency caseworker will complete Form 3870, Request for Adjustment, with specific instructions on actions needed to correct the debtor’s account. Do not attach IDRS prints other than TRDBV, if required, to Form 3870. • Preparing Form 3870 — Prepare the Form 3870 to correct the account. Instructions on the Form 3870 must include the following:

1. "Return Preparer Misconduct" on Form 3870 as the reason for adjustment.

2. The category number that fits the individual debtor scenario, e.g., Category 1, 2, 3, or 4. (See IRM 25.24.1.1.4, Key RPM Terminology and Acronyms.)

3. Whether the debtor received the correct refund, no refund, or an amount greater than the refund (include refunds issued to the bankruptcy trustee because of a refund turnover order).

4. Name and address of the preparer.

5. Amount of refund to be issued, if applicable.

6. Applicable penalty and interest assertion.

7. Erroneous Refund Category D, if applicable.

8. ASED updated - Include the received date of the signed return as intended to be filed to ensure the correct received date is used for interest and statute of limitation calculations.

1. Copy of the debtor’s original return or TRDBV.

2. Copy of the signed return intended to be filed annotated "Taxpayer Intended Return".

   Exception: Note on the Form 3870 if the debtor does not have a filing requirement.

3. Copy of Form 14157, Return Preparer Complaint, and a copy of Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, signed under penalties of perjury.

4. Debtor documentation supporting the RPM claim.

5. If a Claim Disallowance Letter is required:• Whether the complaint is denied in part or full and the appropriate letter.• The applicable paragraphs (See Letter 105-C, Claim Disallowed, or Letter 106-C, Claim Partially Disallowed, for the available paragraphs).• Your contact information for inclusion in the Letter 105-C or Letter 106-C.

(7) Forwarding Form 3870 for Processing. If there is a balance due on the module due to an Examination or Automated Underreporter (AUR) assessment, route the Form 3870:

1. For audit reconsideration, forward Form 3870 per Exhibit 4.13.7-3, Routing of Area Office Reconsideration Requests (as of 10/01/2013), and Exhibit 4.13.7-4, Central Reconsideration Unit (CRU) Addresses.

2. For AUR reconsideration, forward Form 3870 per Exhibit 4.13.7-6, Addresses for AUR Reconsideration Requests.

(8) Cases with Criminal Investigation (CI) Involvement. If the debtor indicates there has been Criminal Investigation (CI) involvement; for example, the debtor states that a CI Agent called or interviewed them, or a Special Agent’s card is included in the debtor’s documentation, then contact CI to determine:

1. If the preparer is under investigation for the preparation of tax returns.

2. If there is evidence that the debtor’s return was prepared by the named preparer.

3. If the RPM complaint should be worked, and if not, how it should be closed.