In the Internal Revenue Manual, there are specific IRS Internal Considerations that IRS employees are supposed to know and follow. This is a TRI Update for anyone considering filing for bankruptcy if there Offer In Compromise is not accepted by the IRS. If you are wondering what considerations the IRS officially takes into account in such a situation, please examine the information below from the Internal Revenue Manual.

The Internal Revenue Manual & IRS Consideration

internal revenue manual, irs

IRS Internal Revenue Manual

The Internal Revenue Manual (IRM) sets forth the policies, procedures, instructions, guidelines, and delegations of authority which control the operation and administration of the Internal Revenue Service. It consists of thousands of pages describing the workings of the IRS. The Revenue Agents, IRS Revenue Officers, and the IRS Appeals Officers often refer to it as “the bible” of their profession, but this is not always the case.

What is so surprising is the Tax Resolution Institute has seen IRS employees ignore these internal considerations or not even take them into account. Both Revenue Officers and Appeals Officers sometimes ignore what is written in the Revenue Manual. Then again, it is quite long and quite detailed.


If the taxpayer states an intent to file bankruptcy if the offer is not accepted, consider whether any of the tax liability can be discharged, and follow the guidance in IRM 5.8.5 and IRM 5.8.10. Considering if the taxpayer were to file bankruptcy, make a general analysis of collectability and the liabilities that would be discharged, and attempt to negotiate an agreeable settlement, as appropriate. Based upon the findings, a hazards approach may be used, based upon the degree of risk determined to exist that the taxpayer would file bankruptcy. Some general determinations to make are as follows:

  1. which liabilities are dischargeable
  2. if the taxpayer has dischargeable non-tax debts
  3. if the taxpayer has any prior history of bankruptcy filing
  4. the overall age of the liabilities
  5. the success of the Service’s prior collection efforts against the taxpayer
  6. any assets that would be excluded from a bankruptcy estate and encumbered by the statutory lien
  7. does the taxpayer qualify for a Chapter 7 discharge based upon the “means test”
  8. have any NFTLs (Notice of Federal Tax Liens) already been filed on assets that would be exempted from a bankruptcy estate.

Nevertheless, whether the IRS employee actually follows these guidelines or whether they chart their own course, it’s hard to know. This is why you need an experienced tax professional in your corner like the tax resolution specialists at TRI. To learn more about how we can help you, please contact the Tax Resolution Institute by calling 818-704-1443.