Does the IRS consider a potential bankruptcy filing by the taxpayer in determining whether to accept the taxpayer’s Offer-in-Compromise?

The Offer Specialist or Appeals Officer is supposed to consider the potential bankruptcy filing by a taxpayer if the taxpayer raises it as a possibility. If either the taxpayer or their representative states that a bankruptcy will be filed if the Offer is not accepted, the IRS employee is supposed to consider the dischargeability of the taxes in a bankruptcy and its impact on the IRS\’s ability to collect.
The author has used a potential bankruptcy filing to reduce the RCP calculation by both the IRS and the Department of Justice Tax Division. Practitioners should make sure they have a bankruptcy attorney work with them on the discharge analysis to make sure it is correct before being presented to the government as a viable option.