IRS provides a form Letter 6865 to report the filing of a bankruptcy petition or declaration of bankruptcy. In situations where the taxpayer files a declaration of bankruptcy and the bankruptcy case has not been settled, the taxpayer must include the filing on their return and send a copy of the filing on form Letter 6865 to support their position that they can participate in an installment agreement. If the taxpayer wishes to participate in an installment agreement and file a bankruptcy petition or declaration of bankruptcy simultaneously, they must complete two separate 179(s), filing both the return and the necessary Letter 6865 form.
In some situations, the filing of a petition in Tax Court will delay the availability of an installment agreement. Due to the lengthy discovery process in Tax Court cases, the installment agreement cannot be effective until approximately 180 days after the return is filed. Typically, the installment agreement will be effective three months after the return is filed. With a Tax Court case, the taxpayer may need to file separate tax returns for the first, second, and/or third calendar quarters of the year in order to receive the 180 days of credit. However, the filing of a petition in Tax Court does not prevent the taxpayer from participating in an installment agreement.
If the taxpayer can full pay, consistent with the parameters set forth by the Secretary for an installment agreement, the taxpayer must be given an opportunity to participate in an installment agreement (or otherwise be given a reasonable opportunity for a collection alternative). d2c66b5586