Check System
Send us your comment!

Your comment will be read by our web staff, but will not be published.

Please do not enter any personal information. Your comment is voluntary and will remain anonymous, therefore we do not collect any information which would enable us to respond to any inquiries.

However, provides a How to Contact the IRS page where you will find guidance on where to submit specific questions.

Share this presentation
Copy and paste the following URL to share this presentation
To email a link to this presentation, click the following:
This program writes a small 'cookie' locally on your computer when you set a bookmark.
If you want to utilize this feature, check the following checkbox. Otherwise, bookmarks will be disabled.
This is an IRS
audio presentation.

To view this page, ensure that Adobe Flash Player
version 10 or greater is installed.

Get Adobe Flash player

Slides PDF

OK, ladies and gentlemen, it looks like it's the top of the hour, so let's go ahead and get started. Welcome to our IRS presentation, Understanding Bankruptcy from an IRS Perspective.

We're glad you're joining us today. My name is Philip Yamalis. I'm a Senior Stakeholder Liaison here at the Internal Revenue Service and I will be your moderator for today's webinar which is slated for approximately one hour. Before we begin, if we have anyone in the audience today that is with the media, we ask that you please send us an email message to the address provided on the slide. When you send that email, please include your contact information and, of course, the news publication that you're with. Our media relations or our Stakeholder Liaison staff can assist you or, of course, answer any questions that you might have during today's IRS webinar. Now, I know that email address is kind of small so let me read it to you.

It's or gov. Again, media members, in your email please include your contact information and the news publication that you're with and our staff will assist or answer any questions that you might have. Now, for those of you that have just joined us today, allow me just to review a few quick items. If you experience a technology issue during today's webinar, this slide shows some helpful tips and reminders. We've posted a technical help document that you can download from the materials button on the left side of your screen and it provides the minimum system requirements for viewing this broadcast along with some best practices and quick solutions. Now, if you've completed and passed the system check, yet you're still having problems then you need to try one of the following. One option is to close the screen where you're viewing the webinar and simply re-launch it. That usually is a quick fix and it works. Now, the second option is to click the gear icon on your viewing screen that you can find in the top right corner of the slide and photo boxes. Now, once you click on that you'll be given two choices. Select flash instead of HLS from the available media box.

Now, if you do not have the gear icon and relaunching your viewing screen does not fix your problem, I strongly recommend that you try using a different browser to launch and view the webinar. You might also want to close all those extra windows and apps that you have open on your viewing device then you're not competing with broadband, OK? Now, we hope you received the PDF version of the PowerPoint and the technical support document in a reminder email. But for any reason you did not, you can now download it by clicking on the materials button which is found on the left side of your screen. I do want to remind you that closed captioning is available for today's presentation. Now, if you're having trouble hearing the audio through your computer speakers, simply click the CC button on the left side of your screen. Now, this feature of closed captioning will be available throughout today's broadcast. During the presentation, we're going to take a few breaks to share some knowledge-based questions with you.

At those times, a polling style feature will pop-up on your screen with a question and multiple choices answers that'll pop-up above your screen. Select a response that, of course, that you believe is correct by clicking on the radio button next to the selection and then click, submit. Now, as a note, you might need to turn off your pop-up blocker to receive these questions. Now, if you don't get the pop-up box for responding, simply enter your response timely in the, ask question, feature, and this way we'll be able to track your participation especially for those of you anticipating CPE or CE credits. Now, if you have a topic-specific question for us today, please submit them to us by clicking on that, Ask Question, button which, by the way, is on the left side of your screen. If you have a question during the webinar, enter it in the text box and then click, submit, and please, please, please, when you send us a question, do not enter any sensitive or any taxpayer-specific information. The last thing we want to do is have illegal disclosure. So, we ask that you wait for your specific topic to be addressed before submitting your question. Oh, one more thing, we really do appreciate your questions, so please, today, don't be shy. If you have them, submit them and we will get to them. OK. Moving along with our webinar today, let me take this opportunity to introduce today's speakers. Veronica Tubman. Veronica is a Senior Tax Specialist with the Internal Revenue Service's Communications and Liaison Division out of Baltimore, Maryland. Good afternoon, Veronica. And we have Sherry Saucerman. Sherry is also a Senior Tax Specialist in the same division and she is my colleague in San Antonio, Texas. Hi there, Sherry. Both work with tax professionals and small business owners in their respective areas providing outreach and education and identifying the ways that the IRS could be more responsive to customers' needs.

So, with that, I'm going to turn it over to my colleague Veronica to begin the presentation.

Veronica? TUBMAN: Thanks, Philip. Today's presentation will focus on the basics of the IRS bankruptcy policies and procedures. We will be focusing on the role of the IRS Insolvency function in bankruptcy cases; how to properly notify the IRS of a bankruptcy filing; and the affect bankruptcy has on taxes and tax liabilities. So, let's begin. There are six Chapters of bankruptcy. Each Chapter has its own rules and offers different types of relief for debtors.

So, here's a little breakdown of the various Chapters. Chapter 7 - Liquidation. A proceeding filed by an individual, business or other entity including corporations and partnership to pay creditors through liquidation and distribution of the debtor's asset. Chapter 9 Adjustment of a Municipal Debt or Municipalities. Now, that's a bankruptcy filed by a municipality generally authorized to be a debtor by state law which is considered to be insolvent or unable to meet its debts as they mature and desire to affect the plan to adjust those particular debts. Chapter 11- Reorganization. A proceeding filed by an individual or business including corporations, partnerships or LLCs where creditors are paid under a plan which may last for several years depending on the type of claim held by the creditor. Chapter 12 - Family, Farmers and Fishermen. Chapter 13 - Individuals. A voluntary reorganization of debt or an individual's debts. Now, that includes wage earners and sole proprietors. The repayment is through a plan which the court can approve for up to 60 months. And lastly, Chapter 15 - International/Cross Border. Now, that's a fairly new one, opened when a foreign court or a foreign representative seeks assistance in the United States, and it's used in connection with a foreign proceeding.

Now, OK, let's take a look at IRS Insolvency. YAMALIS: Veronica? TUBMAN: Yes? YAMALIS: Before you do that, let me just make a quick announcement. We are seeing some participants who are having some difficulty with audio. I'd like to recommend one more thing that seems to work, and that would be to hit control F5. Try that so that that can assist you with any audio problems that you might be having. Again, that's control F5 on your computers. Thanks, Veronica. Please continue. TUBMAN: Cool. Thanks, Philip, for that. This is really good information. Bankruptcy law is codified in Title 11 of the United States Code and is the prevailing authority when a taxpayer files bankruptcy. The Internal Revenue Code is published as Title 26 of the United States Code. Insolvency is a part of the Collection function in the SB/SE Operating Division of the Internal Revenue Service. Now, it's responsible for administering the coordination of tax and bankruptcy law for collecting debt through the bankruptcy court. Bankruptcy laws are separate from tax laws and coordination is necessary to comply with both. Now, in addition, each bankruptcy court may make and amend its own local rules that govern practices and procedures. Actions forbidden in one judicial district may be allowed in another, while actions requiring a court hearing and ruling in one jurisdiction may be resolved administratively in another district. IRS Insolvency employees know, and they follow local rules and standing orders of bankruptcy courts when they are assigned cases. Now, Insolvency is divided into a field operation which FI which you will hear throughout this presentation. It's consisting of four territories with more than 80 post of duties geographically distributed throughout the country so that we can serve you, and a single campus operation center in Philadelphia better known as the Centralized Insolvency Operation. And then you'll hear us refer to that as CIO throughout today's presentation. How does Insolvency learn of bankruptcy proceeding? Good question. Well, the Insolvency function may be informed of a new bankruptcy filing in the following ways -- paper copies of the petition, notices or other documents provided by the court, the debtor or debtor's counsel; oral notification by the debtor or the debtor's attorney; notification from revenue officers or service personnel; or lastly, an electronic notification from the bankruptcy court. Now, that's done through the Electronic Noticing System or ENS or by email from the Bankruptcy Noticing Center or BNC we love our acronyms. The bankruptcy court must use the correct mailing address for the Internal Revenue Service. With few exceptions correspondences from debtors or attorney should be directed to the mailing address shown right on the bottom of your screen Internal Revenue Service P.O. Box 7346, Philadelphia PA 19101-7346. YAMALIS: Awesome. So, Veronica, I'm going to ask that you move your microphone just a little closer to you so that we might be able to hear you just a little better. And while you're doing that, let me ask you quick a question. Is that the mailing address that you just gave us, is that the mailing address used for everything related to bankruptcy? TUBMAN: No, Philip, it's not. This is the mailing address to use for correspondences to Centralized Insolvency now. So, that's without remittances. Good question. YAMALIS: Got you. Got you. Thank you. TUBMAN: Centralized Insolvency receives a notification, but Field Insolvency handles many of the actions. We'll talk more about Field Insolvency on the upcoming slides. FI completes the initial case review in Chapter 13 cases and ensures that any required proofs of claim are completed and acknowledged. If there are no field issues, the case is generally transferred to CIO to monitor for confirmation. Similar to the Chapter 13 case, FI works Chapter 7 Asset cases and transfers most Chapter 7 cases to CIO when there are no issues that require the case to remain in FI. This includes reviewing plans and schedules, completing all proof of claims, ensuring all proof of claims are acknowledged and ensuring the Trust Fund Recovery Penalty or sometimes we call it TFRP investigation is completed when required. The Chapter 7 asset case of a partnership is not transferred to CIO. The partnership case must remain in FI. Now, FI takes all cases, case actions in Chapters 9, 11, 12, and 15 cases to monitor for pyramiding, compliance and payment. FI also make referrals to counsel in all chapters as needed. Now, Field Insolvency case workers appear in court as expert witnesses. They attend first meeting of creditors which we also know as 341 meetings. They participate in outreach efforts and negotiate with debtors or their representatives. They make collection determinations and pursue collection from exempt, abandoned or excluded property in certain large dollar Chapter 7 no asset cases. The Centralized Insolvency Operation identifies complex issues and reassigns them to FI. So, let's talk about the other duty of CIO. Our Centralized Insolvency unit in Philadelphia handles Chapters 7 and 13 bankruptcy inquiries. Now, you can contact them toll free at 800-973-0423. Now, CIO performs most of the clerical duties for all bankruptcy Chapters including loading cases on the Automated Insolvency System which we know as AIS. YAMALIS: Veronica, please clarify that phone number for us one more time.

TUBMAN: Sure. The telephone number that you can contact is toll free now and it is 800-973-0423. Got it, Philip? YAMALIS: 0424 or 23? TUBMAN: Four. It's 24. Thank you for the clarity. YAMALIS: OK. Just thank you so much, 0424 is shown on the slide. Thanks so much. TUBMAN: There we go. Sure. Thanks again. Thanks for the second set of eyes. CIO also works Chapter 7 No Asset cases; however, responsibilities in certain large dollar Chapter 7 No Asset cases are shared by CIO and FI. CIO monitors Chapter 13 cases for confirmation of the plan, so, after the case is transferred from FI to CIO and they process Chapter 13 trustee payments as well. Upon closure of a Chapter 13 case by the bankruptcy court, CIO makes any necessary account adjustments and closes the case on AIS. Generally, CIO works Chapter 7 asset business and individual cases transferred to them by FI, of course, after the initial case review has been completed, all proof of claims have been acknowledged and there are no issues that require the case to remain in FI. Philip, thanks again for all your help, but I think here's a good spot for our first polling question. Polling Question YAMALIS: Veronica, I think you're right. I tell you these acronyms that we use, it's a tough day at the IRS. Remember FI is Field Insolvency; CIO, Centralized Insolvency Operation. I get those mixed as well, that's why I just needed to clarify them. All right. Let's go to our first polling question. Our first polling question which should pop-up on your screen is where should debtors and trustees send correspondence meant for the Internal Revenue Service? Please take a minute and click on the radio button that you believe most closely answers this question, based on the information Veronica just shared with you. Do you think the correct answer is A, it depends on the Chapter filed; B, it depends on where the petition is filed; C, to address used for paper filed returns or to the mailing address D, to the mailing address for Centralized Insolvency. Let me give you just a few seconds to make your selection. Where should debtors and trustees send correspondence meant for the IRS? Take a minute, click on the radio button that you believe most closely answers the question. OK. Let's stop the polling now. And, of course, we'll share the correct answer on the next slide. And, ladies and gentlemen, the correct response is D, and that is to the mailing address for Centralized Insolvency. Let's take a look now and see how many of you responded correctly and I see that 78 percent responded correctly. So, Veronica, just take a half a minute here and clarify why that address is important. TUBMAN: Sure. Sure, Philip. So, just remember when the correspondences come from the debtor and the trustee, they are sending the information to the Internal Revenue Service, so that means that all of that very important information should come to our mailing address for Centralized Insolvency. Thanks, Philip. YAMALIS: OK. Got you. Thank you. All right. With that, Sherry, let me turn it over to you to continue our presentation. I believe the next topic today's webinar has is automatic stays. Welcome. SAUCERMAN: Hey. Thank you, Philip, and you are correct, the next topic is the automatic stay. This is one of the reasons it's important that you send any notification to the Centralized Insolvency Operation and the correct address.

The filing of a bankruptcy petition under any chapter acts as an injunction or legal prohibition of further action against the estate, the debtor, or the property of the debtor, and that injunction is called the automatic stay. Now, the automatic stay takes effect immediately upon filing of a bankruptcy petition with the court, and it continues against property of the estate until the property is no longer property of the estate. Now, back in 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. That's a long name so we call it BAPCPA. And that made several changes to the bankruptcy code to keep debtors from abusing the bankruptcy system. We'll be covering several of these changes throughout this presentation and we're going to start with the change it made to the automatic stay. Now, as a result of BAPCPA, as the debtor files an individual Chapter 7, 11 or 13 bankruptcy case within 12 months of another bankruptcy case which was dismissed, the assumption is that the case was not filed in good faith, and in this case the automatic stay will terminate 30 days after the petition date unless that dismissal was for failure to pass the means test in a Chapter 7 case or if the court agrees to extend the stay. Now, even though the automatic stay terminates, the stay will continue against the property of the estate until that property is no longer property of the estate. Now, if the debtor has two or more individual filings in the past 12 months, then the automatic stay doesn't go into effect at all. This means that there is no stay of collection actions as to the debtor, their property, or the property of the estate. And, again, this would not apply if the dismissals were for failure to pass the means test or, again, if the court enters an order to allow the stay to go into effect. Now, the effect on the automatic these effects on the automatic stay are also going to apply even if it's an involuntary case that's commenced against the debtor during that 12-month period. Taxpayer rights protected by the bankruptcy code must be honored, and the IRS procedures dictate that all IRS employees exercise due diligence to ensure automatic stay is not violated. And if something were to occur, they initiate corrective actions within two work days of becoming aware that the stay has been violated. Now, Veronica mentioned earlier that Field Insolvency makes sure that all proofs of claim are filed and acknowledged by the court. So, let's talk a little bit about proofs of claim. A proof of claim is a document that the creditor files with the bankruptcy court to assert a right of payment from the bankruptcy estate for pre-petition debt. A claim can also be filed for post- petition debt in some instances. The goal of Insolvency is to protect the government's interest and ensure taxpayer rights are protected when we're filing these proofs of claim. Now, in a bankruptcy, there are three basic types of debts or claims. There is secured, priority, and unsecured general. A claim is secured when a valid Notice of Federal Tax Lien was filed prior to the bankruptcy and there's at least some equity in the assets to secure the lien.

A priority claim is not secured but it is entitled to priority for payment before certain other creditors. An unsecured general claim is not secured and is not entitled to priority treatment.

So, the tax debts on the proof of claim are designated as being within one of these three categories. In preparation for working those proof of claim issues, Insolvency is going to have to review a number of resources. They're going to look at the IRS document. They're going to look at the electronic records and they can access them through PACER which is Public Access to Court Electronic Record system. And that gives them access to the petition, the bankruptcy petition, the schedules that are filed with it and the taxpayer's statement of financial affairs.

They're going to look at the Notice of Federal Tax Liens and see what periods have liens filed on them. They're also going to review property tax records. They're going to look at vehicle pricing and information websites, and then they may also look at some other information systems, for example, Accurint is a good one. It's an Internet-based research tool for finding people, businesses and assets. They're going to be verifying what's on those schedules. OK. Now, switching gears, what happens if the debtor files a return and is due a refund while they're in bankruptcy. Well, in these cases, Insolvency must decide whether to issue the refund to the trustee or to the debtor. They might ask counsel to file a motion to lift the automatic stay so we can offset the refund immediately, or they may retain the refund to protect the government, the service's right of offset. But, again, they would only be doing that with agreement from counsel. Now, although the service has the right to offset refunds, for bankruptcies filed before October 17, 2005, that's the date of enactment of BAPCPA, you'll hear that date often, for bankruptcies filed before that date, the automatic stay may prohibit the actual making of the setoff until the stay was lifted. Now, BAPCPA created an exception to the stay for offsets of pre-petition income tax refunds against pre-petition income tax claims. OK, Philip, I think it's time for our next polling question. YAMALIS: OK, Sherry. I think you're correct. Let's hope everyone has been paying attention and let's get out our second polling question to you.

That question will be who files proofs of claim for the IRS. Again, who files proofs of claim for the IRS? Which do you think is the correct answer? Is it A, Centralized Insolvency Operations; B, the attorney for the debtor; C, Field Insolvency or FI; or D, the bankruptcy trustee. Ladies and gentlemen, you know how this works. Take a minute, click on the radio button that you believe is the correct answer for the question who files proofs of claim for the Internal Revenue Service. We'll give you just a few more seconds to go ahead and answer that question correctly. OK. Let's stop the polling now and we'll share the correct answer on the next slide. And the correct response is C, Field Insolvency. Let me take a look and see how many of you responded to that. And how many responded to that correctly. OK. It seems that not many of you answered that correctly. So, Sherry, I'm bringing you back to help clarify that answer. SAUCERMAN: Yes. OK. Thanks, Philip. Now, remember, the proof of claim is going to be filed by a creditor, so it wouldn't be the attorney for the debtor. And it wouldn't be the bankruptcy trustee. So, the unit for the IRS that's doing all the research is the Field Insolvency, so that is who does file the proof of claim. I hope that makes it clearer.

YAMALIS: I hope so, too. And I hope it's because of technical difficulty that we didn't get a lot of correct answers on that, because it was really low and that was very surprising but probably just to clarify that in case we couldn't get that out correctly. So, Field Insolvency is the correct response for that. With that, Veronica, let me turn it back over to you to continue our discussion of BAPCPA or the Bankruptcy Abuse Prevention and Consumer Protection Act, oh my, those acronyms. TUBMAN: Yes. Thanks, Philip. Let's talk more about Chapter 13 otherwise known as BAPCPA. Sherry mentioned it earlier. Now, if a debtor fails to meet these obligations, their cases may be dismissed or converted. Debtors are now required to file all tax returns becoming due after the date of the petition. If the debtor fails to file such a return or properly attain or obtain an extension, the Service may request the bankruptcy be converted or dismissed. If the debtor does not file the return or obtain an extension within 90 days of the request now, the court must convert or dismiss the case. Under Chapter 13 debtors, they are required to file returns with the Service if required under tax law no later than the day before the scheduled 341 meeting of creditors for the taxable period ending during the four-year period ending on the petition date. If they have not yet done so, filing returns is a requirement of Chapter 13 plan required for confirmation. A debtor whose plan cannot be confirmed faces conversion or dismissal. So, let's talk about Chapter 11. Under Chapter 11, debtors must file and pay post-petition tax timely or face conversion or dismissal of their cases or alternatively an appointment of a Chapter 11 trustee. The timely filing and payment of the post-petition taxes is an express duty of the trustee or debtor in possession in small business cases not later than seven days before the 341 meeting of creditors. Now, debtors must provide the trustee with a copy of their federal income tax return or transcripts if locally allowed for the most recent years ending immediately before the petition date. The debtor must also provide a copy of that return or transcript to any creditors who timely request it. If the debtor fails to provide the return to the trustee or a requesting creditor, the court must dismiss the case unless the debtor demonstrates the failure to so comply is due to circumstances beyond their control.

Before we continue, let's talk about transcript. OK. If you need a transcript of account, access and put in the search engine transcript. Select the welcome to transcript link and it will provide information on how to get a transcript online or by mail. Now, there are three methods for debtors to secure all the information they need Form 4506-T request for transcript of tax return or go to Another method is just to give us a call at 800-908-9946. And lastly, tax professionals, you can get all the information you need at Philip, this is a really good spot for another polling question.

YAMALIS: You think? Let's do it. TUBMAN: OK. YAMALIS: Our third polling question is, what do you know, another multiple-choice question. OK. Here it is. How can you get a transcript of your account? Well, it sounds like you just told us that, Veronica. So, here it is. How can you get a transcript of your account? Is the answer A, mail form 4506-T which is called request for transcript of a tax return; or B, use transcripts online or by email, I mean, or by mail on; C, call the phone number that you see on your screen 800-908-9946; or D, is it all of the above. Like before, take a minute, click on the radio button that you believe is the correct answer. Look over the polling question again. Select the one that you believe is the correct response. Just a few more seconds before we close the polling. OK. Let's go ahead and close the polling now. And the correct answer is on how you get a transcript of your account, it's D, all of the above. Now, I see that 98 percent 98 percent of you responded correctly. That's a great response rate. So, with that, I'm going to turn it over to you, Sherry. Let's turn it over to you to discuss something called the First Meeting of Creditors.

Is that right? SAUCERMAN: OK. Thanks. Yes. Thank you, Philip. I'm glad to see that we came much better on that one. Let's hope I can do better on the last polling question, too.

All right. So now, Veronica has mentioned the 341 meeting a couple of times and that's also the first meeting of creditors. So, let's talk about it in a little more detail. First meeting of creditors, it's interchangeable 341 meeting, first meeting of creditors. It's generally held within 20 to 50 days after the case begins. Now, this meeting is conducted by the court-appointed trustee and the debtor is required to attend. And what this meeting does is it offers an opportunity for the debtor to be questioned under oath by creditors and the trustee concerning financial affairs, debts, assets and property issues. Now, an IRS representative may attend the 341 meeting and they may question the debtor about various issues. So, for example, if there is a potential unpaid employment taxes and there's a potential Trust Fund Recovery Penalty liability, they might ask the taxpayer not only about their own role in the payment of those employment taxes, but they might also be asking for the names, duties and responsibilities of other officers responsible for withholding and paying over those employment taxes. They might discuss self-employment tax issues. They could question the debtor as to with regard to their financial affairs and any inconsistencies that they noticed during their research between what's listed on the debtor's schedule and what they found out in their research. They could also ask about assets that are listed on the schedule that appear to be undervalued. They might be asked about items that appear to be improperly scheduled. Also, if there are any unfiled returns, they could provide deadlines for filing and then they might also question plan feasibility and if there appears to be any unreported income. OK. Now, let's talk about the assets of the bankruptcy estate. Some assets may have special treatment. A debtor may claim certain property as being exempt from the bankruptcy estate. Now, exempt property is not liable for any debts of the debtor except for alimony, security interest, non-dischargeable tax debts and dischargeable liabilities that are secured by a Notice of Federal Tax Lien. And these exempt assets cannot be liquidated by the trustee. Debtors must select either the federal or the state exemption. Selection for both of them is not permitted. Now, property that's exempted by either state or federal tax law includes like the 401(k)-retirement plan, household goods, homestead. Upon discharge, dischargeable liabilities can still be collected from exempt property if there was a Notice of Federal Tax Lien filed prior to the petition date as long as that lien remains valid against this specific property. Now, there are also certain property interests which are excluded from the bankruptcy estate. Now, this means the property interest does not become property of the bankruptcy. An example of excluded property would be the ERISA-qualified pension plan that's Employee Retirement Income Security Act, those are generally excluded from bankruptcy estate. For cases filed on or after October 17, 2005, certain educational IRAs that's subject to limitations may also be excluded. Now, unlike exempt property, a Notice of Federal Tax Lien is not necessary to collect from excluded property. With proper approval Insolvency can issue levies on excluded property before closing their case.

Now, there's one more category of property and that's abandoned property. Abandonment severs a bankruptcy estate's interest in the property. The trustee may be allowed to abandon any property of the estate that is burdensome or of inconsequential value to the estate. And there are two types of abandonment. There's administrative abandonment. Now, this is when the property is listed on the schedule of assets, but it's not disposed of by the trustee then it's abandoned to the debtor upon closing of the estate. There's also affirmative abandonment. In this case, the trustee may actively abandon the property to the debtor or to a party with a possessory interest. A notice of the hearing regarding that abandonment is required to be issued but the hearing isn't always held. As in the case of excluded property, a Notice of Federal Tax Lien is not necessary to collect from abandoned property. With proper approval, Insolvency can issue levies on abandoned property before closing their case. OK, Philip, I think it's time for our final polling question. YAMALIS: I think you're right, Sherry. So, our fourth and final polling question SAUCERMAN: OK. I think we're... YAMALIS: Sorry about that. SAUCERMAN: OK. Good. YAMALIS: A couple of technical difficulties here. I don't know why another phone is ringing in the background. Did you hear that, Sherry? SAUCERMAN: I did, just for a second.

YAMALIS: Oh, man. Sorry about that. Let's get to our fourth and final polling question.

Which of the following may be done at the first meeting of the creditors otherwise known as the 341 meeting? Which do you think is the correct answer? Is it A, provide deadlines to file delinquent returns; B, secure Trust Fund Recovery Penalty information; C, question the inconsistencies between schedules and research; or is it D, all of the above. Again, ladies and gentlemen, you know how this works, review the question again. Which of the following may be done at the first meeting of the creditors or the 341 meeting? Click on the radio button that you believe is the correct answer. We'll give you just a few more seconds to go ahead and answer that polling question. OK. Let's go ahead and stop the polling now. And we'll share the correct answer on the next slide. OK. There it is. The correct answer response is, what do you know, it's D, all of the above. Let's see how you did. It's showing that 93 percent of you responded to the polling question correctly. So, that's telling me that everyone is paying attention and that perhaps our technical difficulties have been solved. So, with that, Veronica, let me turn it back over to you to talk about some of the exceptions to discharge.

TUBMAN: Thanks, Philip. There are several exceptions to Discharge in individual or joint Chapters 7, 11, and 12 cases. Now, tax is entitled to priority including the Trust Fund Recovery Penalty portion of employment taxes and any Trust Fund Recovery Penalty assessment. And an involuntary case, taxes that arise during the gap period which is between the dates of the filing of the bankruptcy petition and the order for relief, taxes due when returns filed late, and any time after the date that is two years before the petition date. Now, also, taxes with respect to which a tax return was not filed or is unfiled and taxes for which the debtor filed a fraudulent return or otherwise willfully attempted to evade or defeat payment of the taxes.

Now, that's including certain restitution-based assessments. Now, it's also important to know that while these taxes are exceptions to the discharge, penalties may be dischargeable when tax is not dischargeable. So, an individual or joint debtor may not be eligible to receive a discharge in the current case if they received a discharge in a prior bankruptcy case. OK. Now, so, let's take a look at Chapter 13. Under Chapter 13, the following categories of tax liabilities will not be dischargeable upon completion of a plan. Trust fund taxes, taxes based on fraudulent return, taxes due on unfiled returns and lastly, taxes due on returns filed late and after the date that is two years before the petition date. Now, again, while these taxes are exceptions to discharge, penalties may be dischargeable when tax is not dischargeable. All righty now, one last item, resources additional bankruptcy information can be found on

So, just go to and in the search engine, type, bankruptcy. Publication 908, the Bankruptcy Tax Guide is the most recent version. Publication 5082, What You Should Know About Chapter 13, Bankruptcy and Delinquent Returns., just go right ahead and access the manual for Part 5.9. That's all I have for now, Philip, and I'm turning it back over to you.

YAMALIS: Well, thank you, Veronica. Those are some excellent resources on that resource slide.

So, take advantage of them. It always helps to have those available for you. OK. So, I'll be monitoring the upcoming and question and answer session. It's me again. I'm Philip Yamalis.

Before we start the Q&;A session, I definitely want to thank everyone for attending today's presentation on Understanding Bankruptcy from an IRS Perspective. Now, if you haven't input your questions yet, there's still time to do so. Go ahead and click on the, Ask Question, button, type your question, and simply click, Submit. So, joining us today for our Q&;A session is Maria Valerio. She's a Senior Program Analyst for Collection Policy Insolvency in Brooklyn, New York. Maria will be answering your questions today. Hi, Maria, how are you? VALERIO: Hello.

I'm good. Thank you. YAMALIS: Great. So, one thing before we start, now, we might not have time to answer all the questions submitted. However, let me assure our audience today that we will answer as many as we have time for. Now, if you're participating with us to earn a certificate and related continuing education credit, you will qualify by participating at least 50 minutes from the start time of the webinar. You don't need to stay on for the full 60 minutes, but, of course, we hope you will. Now, that time before the top of the hour when we were chatting, that really doesn't count. So, please stay with us until the end of the webinar.

So, Maria, we've received quite a few questions. So, let's get started and we can try to get to as many as possible, OK? VALERIO: Sure. YAMALIS: Let me see. All right, here we go. So, the first question that came in is why does one need to report a bankruptcy filing with the Internal Revenue Service? Why is this so important? VALERIO: So, if you file if you notified the IRS of your bankruptcy filing, they're able to file a claim in court and therefore you'll be able to pay your tax liability to the plan or you'd be even be able to get a discharge if it meets the criteria. So, it's always important to notify us. It also prevents collection action due to the automatic stay being in affect. So, if you have someone or a revenue officer or someone that's trying to get collection action, it will kind of put a hold on that until you can get your finances in order and actually pay to the plan for the bankruptcy if needed. YAMALIS: Yes, absolutely. I guess most importantly is you don't want revenue officers to continue hassling you when there's a bankruptcy as long as it's reported with us. OK. So, we did use a lot of acronyms today and one of them was CIO, which we know is Centralized Insolvency Operations. Can CIO answer questions that individuals might have as to a status of a bankruptcy and/or advise that individual what information, what additional information is necessary? VALERIO: Absolutely. CIO is kind of our starting point. They open up all our cases. They basically handle all the clerical work for all the bankruptcies. So, that should be your first point of contact unless you have a specific question at hand in your case. CIO would be able to either tell you what you need to do or answer any of your questions or direct you to the person that's actually handling your case and give you the exact person that can answer any questions you have if they are not able to. YAMALIS: And do you have that CIO phone number handy for us, Maria, that we can share with our audience once again? VALERIO: Absolutely. It's 800-973-0424. YAMALIS: Excellent.

Thank you so much. VALERIO: You're welcome. YAMALIS: Let me throw another question at you. Do taxpayers need to notify the IRS when they file bankruptcy regardless of whether they owe the IRS, or do they notify us only if they owe the Internal Revenue Service? VALERIO: You would notify the IRS mainly if you think you owe us anything or if there's a potential for you owing.

If you don't notify us, like I said before, we wouldn't be able to put a hold on your account or if you potentially owe something where there's some kind of examination going on, it would help if you notify us. If you don't owe taxes or if you don't have any filing requirements, then there's really no need to notify us as we would not be doing anything with your case. YAMALIS: When in doubt, go ahead and notify us. VALERIO: Absolutely, especially if you have a business.

YAMALIS: All right. Someone sent in a question. It says I saw in a slide that Field Insolvency only oversees Chapter 7 and Chapter 13. Can you clarify that? VALERIO: Sure. Our Field Insolvency handles all complex cases. So, they will handle Chapter 11, Chapter 9 and Chapter 12. They also handle Chapter 13, the first part where they'll file a claim. They can do the review of the claim. After that, it would go to Centralized Insolvency where they're just monitoring for payments. As for 7, if it's Chapter 7 asset, Field Insolvency would be filing to some claims. They'll be doing the review of the case and discharge ability, determinations, and then they would forward it at the CIO to monitor for discharge and then the closing is Central Insolvency. So, basically CIO does all the clerical work. Filed Insolvency does all the complex case reviews of cases for complex issues based on all the proof of claims. They're the specialist for the bankruptcies. YAMALIS: OK. But it's not necessarily only Chapter 7 and Chapter 13. They're going to take a look at all Chapters and then file as necessary or send as necessary to Centralized Insolvency, correct? VALERIO: Yes, correct. YAMALIS: OK, all right, very good. I'm trying to there we go. Here's another question that just popped up. Can you clarify just a bit on dismissal, our speakers spoke on dismissal of bankruptcy. Can you elaborate on that just a bit more? VALERIO: Absolutely. A dismissal is basically like the bankruptcy never happened. Either the taxpayer didn't provide necessary information to the court or they didn't complete their petition or complete their schedules or something that prevented the case from continuing. So, when they get dismissed, it's basically like the bankruptcy never happened. There's no it's basically ended at that point and there's no relief of any kind from the bankruptcy. So, they'll continue to owe whatever they owed before the bankruptcy. YAMALIS: Got you, got you. OK. All right, here's another question that came in. What is a 341 meeting?

That's for... VALERIO: The first meeting of creditors. The 341 meeting is also called the first meeting of creditors. YAMALIS: First meeting of creditors. VALERIO: Yes. It's a meeting that's conducted by the court-appointed trustee and the debtor is required to attend. The meeting offers an opportunity for the debtor to answer questions under oath by the creditor and the trustee concerning financial affairs and assets and property issues. Creditors are also allowed to attend the meeting and answer questions regarding anything that they feel that they need to. Insolvency would possibly attend the meeting if they had questions on the CFRP to get information that's able to assist them in making a determination and making an assessment if they have questions regarding the missing returns, any questions on self-employment, or any other assets that they may have included or may not have included on their schedule. YAMALIS: Interesting, very good, that's a nice clarification. I appreciate that. There's so many questions coming in. I know we're not going to get a chance to answer a lot of them. But, here's one that I think is very important that we should clarify before we call it a day here.

What's the difference between Chapter 7 and Chapter 13 of bankruptcy Chapter 7 and Chapter 13? VALERIO: Chapter 7 is basically liquidation and there are two types. There's a Chapter 7 Asset and there's a Chapter 7 No Asset. So, Chapter 7 Asset basically means you have assets.

The trustee is going to look at whatever your assets are and they're going to start liquidating, selling off your assets to pay off your debtors. Chapter 7 No Asset, so you have nothing and then basically they're going to go to the discharge ability rules or your creditors to see what is dischargeable and it's basically like they're just wiping it out. Chapter 13, it's usually wage earners and/or sole proprietors, and basically you're making a plan to pay all your creditors within five years so that they're not directly contacting you, but you're paying a specific amount that you stated in the plan that you're able to pay and basically that's the amount that you're responsible for. It's usually for five years, a five-year payment plan to pay off any of your debtors and based on like priorities or general secure claims that you filed in court.

YAMALIS: Maria, that's awesome. That's a nice clarification. I appreciate that. Now, unfortunately, that's all the time that we have for questions. I do want to thank you for sharing your time with us and your knowledge with us today. Thank you so much. VALERIO: Thank you. YAMALIS: Before we close the question and answer session today, I'd like our speakers to share with us what key points that they want us to remember from today's webinar. So, Veronica, let me turn it over to you to share some key points with us. TUBMAN: Thanks, Philip. Now, just remember there are six different bankruptcy Chapters, Chapter 7, Liquidation; Chapter 9, Municipality; Chapter 11, Reorganization; Chapter 12, Family Farmers and Fishermen; Chapter 13, Individual; and Chapter 15 which is International/Cross Border. Publication 908 is a really good bankruptcy tax guide to use. Publication 5082 is What You Should Know About Chapter 13 Bankruptcy and Delinquent cases. So, don't forget. You can always go to Use the keyword search, bankruptcy. And back to you, Philip. YAMALIS: Very good. And if you missed any of that, again, you can go to the, Materials, button and download a copy of this PowerPoint so that you have those in front of you. Thank you so much, Veronica, excellent job today. Let me turn it over to Sherry. And Sherry, if you could share some of your key points for us as well.

SAUCERMAN: Yes, sure, Philip. I want everybody to remember. Now, the automatic stay prohibits collection. So we don't violate the stay, it's really important that the IRS is notified if we are a creditor. And remember, we could also be a creditor if you have unfiled returns for which you might owe. The claims could be secured priority or unsecured general and most taxes are going to fall into the priority or the secured category. They'd be secured if the NFTL was filed prior to the bankruptcy. And don't forget. That NFTL could still attach to exempt properties after you're discharged from bankruptcy. Back to you, Philip. YAMALIS: Thanks, Sherry, very, very good key points from both of you. We certainly appreciate the phenomenal job that both of you did today and, Maria, for joining us. Ladies and gentlemen, we are planning additional webinars throughout the year. To register for any upcoming Internal Revenue Service webinars, we remind you to visit and use the keyword, Webinars, select, Webinars for tax practitioners, or, Webinars for small businesses. And, yes, we will be offering certificates and CPE credit for other upcoming webinars. That seems to be a popular reason why you attend. So, you might also visit the IRS video portal at That hyperlink is on the slide. The IRS video portal continues or contains video and audio presentations on topics of interest to small businesses, to individuals, and tax professionals. You'll also find video clips of tax topics and archived versions of live webinars. Again, a big thanks to Sherry, Veronica, for a great webinar today, and to Maria for sharing her expertise and answering your questions today. I also want to thank you, our attendees, for attending today's webinar, Understanding Bankruptcy from an IRS Perspective.