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.

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

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

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.

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

IRM 1.4.51.8.3, Case Management Tools, IRM 5.9.12, Insolvency Automated Process, 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 also include the frequency and purpose of each report.

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.

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.

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).

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

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

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.

Some acronyms used specifically in this IRM section are listed below:

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

The US Bankruptcy Code (11 USC).

Bankruptcy Rules (Federal Rules of Bankruptcy Procedure).

Local Bankruptcy Court Rules.

Applicable Case Law.

Document 13219, AIS User Guide.

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

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 more additional information about the TBOR, see : https://www.irs.gov/taxpayer-bill-of-rights.

Mail Receipt. The CIO support units receive mail based on a daily schedule set by the Campus Support function. Mail received for Insolvency is extracted by Campus Support. Insolvency mail caseworkers must date stamp the front page of each document received in the Centralized site.

Tax Returns. Original tax returns are sometimes delivered through Insolvency mail. The front page of each tax return received by FI or CIO must be stamped with the IRS received date using an official IRS date stamp. If an official IRS date stamp is not available, the caseworker must write the date received (Received MM/DD/YYYY), along with caseworker signature and title, in the upper left hand margin of the first page of the tax return. A valid hand written received date stamp consists of the following:

Transmittal Required. When moving mail out of the Mail Support Team to FI groups or to other CIO units, caseworkers must prepare Form 3210, Document Transmittal, to accompany the referenced mail item(s).

Types of Mail. Administrative mail is classified into the following categories:

Identifying Time Sensitive Mail. For Insolvency purposes, the definition of "time sensitive" mail is documents and letters that require some kind of IRS action within fifteen calendar days. Examples of mail that can be time sensitive include the following:

Specialty Mail for Field Insolvency. In addition to bankruptcies, the Field Insolvency operation handles receiverships, assignments for the benefit of creditors, FBAR bankruptcies, SIPA proceedings, and review of the Consolidated Appropriations Act (CAA) effective December 27, 2020. When the CIO receives correspondence on any of these issues, that mail must be processed using time sensitive procedures.

Processing Time Sensitive Mail. If the mail is time sensitive, the caseworker must query the case on the Automated Insolvency System (AIS) or the Integrated Data Retrieval System (IDRS) to determine where and to whom the case is assigned. (See Exhibit 5.9.11-1, Accessing a Case on AIS and Document 13219 , AIS User Guide.)

AIS Research. When the case appears on the AIS screen, the name and docket number must match the debtor name and the docket number on the notice. The state in which the bankruptcy was filed can help identify the correct case. The court jurisdiction code within a state (e.g., ILN for Illinois North) may also be helpful.

Advising Field Insolvency. Within two workdays of receipt, the CIO caseworker must advise FI of the notice. Methods of advice may include:

Documentation. The mail caseworker must document the AIS case history briefly with the nature of the time sensitive mail and the actions taken.

Assigned to Campus. If the case is assigned to Centralized Insolvency Office, the caseworker must identify, sort, and forward time sensitive mail to Field Insolvency..

Routine Mail. Routine mail does not require an immediate IRS response, or it may not require an IRS response at all. Routine mail can be a motion, notice, or order advising the Service of an action. This type of mail may include:

Routine Mail and AIS Action. In processing routine mail, the caseworker must determine if AIS processing is required by the Mail Support Team, such as the input of dismissal or conversion dates. In cases where AIS data must be input, the caseworker must query the case referenced in the correspondence on AIS. (See Exhibit 5.9.11-1, Accessing a Case on AIS and/or Document 13219 , AIS User Guide.) After the caseworker has verified that the name, taxpayer identification number (TIN), and docket number on the notice match the name on the AIS screen, (s)he must document the type of notice received and what action, if any, is being taken.

Direct to Classified Waste. Some mail is sent to the IRS as a matter of course when it has no relevance to Insolvency case processing. This mail can be directed to classified waste without annotating either AIS task-specific screens (such as the proof of claim screen) or the AIS history screen. Exhibit 5.9.11-2, Mail Direct to Classified Waste, provides a list of notices and documents that are included in this category of mail. Refer to IRM 5.9.11.4.7, Document Disposition, for guidance on handling classified waste documents.

Actions. CIO caseworkers input dismissal dates for all chapters on the AIS entity screen when paper notifications of dismissal are received in the CIO. To input the dismissal date on AIS, the caseworker must take the following steps.

Actions on Paper Discharges. If the mail being sorted is an order for discharge, the Insolvency caseworker must take the following steps.

Distribution. Duplicate correspondence or correspondence cited on the classified waste list requires no AIS history documentation. Receipt of other correspondence must be documented on AIS if it is routine and will be disposed of in classified waste or is correspondence that requires special handling such as time sensitive mail or original tax returns. Caseworkers do not need to annotate the AIS history concerning routine correspondence being forwarded to FI or to other areas of the CIO.

Managerial Review and Oversight All documents deemed "Classified Waste" by a caseworker should be available for managerial review and oversight prior to being placed in the classified waste bin. IRM 1.4.51.16(3), Quality, states, "Managers are responsible for the quality of all work assigned to their group and for all work which leaves their group regardless of the methods used. Managers must devise a system of quality control which works for them."

Records Retention. Refer to IRM 1.15.1.3.6, Responsibilities of All IRS Employees and Contractors, for disposition authorization before discarding correspondence as classified waste. Certain mail documents may be placed in the classified waste bin when they are no longer needed for administrative, legal, audit or other operational purposes. Employees must follow official guidance provided for records retention. Records cannot be destroyed without approval from the National Archives Records Administration (NARA).

Order of Conversion or Notice of Possible Dividend. Chapter 11, Chapter 12, or Chapter 13 cases may be converted to Chapter 7 Asset or No Asset cases, and Chapter 7 Asset cases may be converted to Chapter 7 No Asset cases. Occasionally, a Chapter 7 case is converted to a Chapter 11 proceeding. Most bankruptcy courts open Chapter 7 cases as no asset cases. A Notice of Possible Dividend converts a Chapter 7 No Asset case to a Chapter 7 Asset case. Conversions to a Chapter 7 Asset case may also be identified as "Notice of Assets" or "Notice to File Proof of Claim" . When an Order for Conversion or Notice of Possible Dividend is received, the Insolvency caseworker must take the following steps.

Refund Credits to Trustees. CIO caseworkers are responsible for the input of trustee turnover information onto AIS, and the input of the TC 520 CC 81 on IDRS. The caseworker will input a TC 520 CC 81 on the debtor’s most recent tax period to prevent a systemic refund to the debtor. Refer to Exhibit 5.9.6-6, TC 520 Input Guide for Trustee Turnover Requests.

Property of the Estate. In Chapter 7 and Chapter 13 cases, pre-petition refunds are considered part of the estate. In Chapter 13 cases, post-petition refunds are also considered part of the estate if such refunds are committed to the plan, or if the plan provides that property of the estate does not vest in the debtor until the plan is completed. Procedures for setting up a request for a refund turnover to a Chapter 7 trustee are found in Exhibit 5.9.6-1, Processing Chapter 7 Turnover Requests when the Case is Not on AIS, Exhibit 5.9.6-2, Processing Chapter 7 Turnover Requests when the Case is Closed on AIS, Exhibit 5.9.6-3, Processing Chapter 7 Turnover Requests when the Case is Open on AIS, and Exhibit 5.9.6-4, Conversions and Turnover Requests. Turnover requests for Chapter 13 refund credits are handled similarly. To signal the presence of a trustee turnover request, the caseworker must click on or type in "TTEE RFND" from the drop down menu in the "Classification" field on the AIS Classification Screen.

When a trustee decides that he/she no longer has an interest in the taxpayer's refund, the trustee will notice IRS. The title of the notice may vary from court to court. Such notices may be titled "Vacate Turnover" , "Reverse Request for Refund" , "Release the Trustee’s Directive for Refund" , or "Order Abandoning Trustee’s Interest in Refund" . Follow the instructions in Exhibit 5.9.6-5, Processing Withdrawals or Rescissions of Trustee Requests, when this type of notice is received.

Misrouted Mail. Mail is sometimes misrouted to the Insolvency mail drop. The caseworker should query AIS and, if necessary, IDRS, to determine the intended destination of the mail. If the mail is non-Insolvency, the caseworker should make a reasonable attempt to determine the correct mail address and forward it accordingly. If the proper recipient cannot be determined, the caseworker should return it to Campus Support.