Bankruptcy

IRS holds that withholding is not part of the bankruptcy estate. Issuance of the lock-in letter is not considered a violation of the automatic stay.

If you are contacted by Insolvency, follow their instructions.

If you are directed to release or modify the lock-in, follow general case processing procedures. Document the AMS history with the name and contact information of the employee providing the direction.

When working the Outcome 3 case listing, DO NOT issue a lock-in letter for a taxpayer in bankruptcy unless you have been previously directed to do so by a field bankruptcy specialist. Check IMFOLI for an open bankruptcy, identified by a literal "-V" . If present, document AMS and close the case.

When working correspondence or incoming calls on Outcome 2 cases, if the taxpayer says that he or she is in bankruptcy and the bankruptcy was filed between the date that the Outcome 2 case was selected for the program and the date that the lock-in letter was issued, ask the taxpayer the chapter number of the bankruptcy proceeding and follow the instructions below:

Chapter 7: Follow general case processing to determine whether lock-in should be modified or released.

All other Chapters, or taxpayer doesn't know: Release lock-in. See IRM 5.19.11.7., Responses and Redeterminations for release procedures.