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Seriously Delinquent Taxpayers May Lose Their Passports

February 06 2018

by Zach Montgomery

If you are planning on taking an international trip and have a seriously delinquent tax debt, you may need to contact your travel agent.

As many tax reform changes from the Tax Cuts and Jobs Act begin taking effect in January 2018, the IRS is also implementing a change this January. According to the Fixing America’s Surface Transportation Act of 2015 (FAST Act), the IRS has the authority to certify a seriously delinquent tax debt of a taxpayer to the State Department. Accordingly, the State Department may then revoke, limit, or deny the taxpayer’s passport.

This change may lead you to ask several questions:

What is a seriously delinquent tax debt?

A taxpayer has a seriously delinquent tax debt when he or she has an unpaid tax debt (including penalties and interest) totaling more than $50,000*. In addition, one of the following actions must have occurred related to the tax debt:

  • The IRS filed a notice of federal tax lien, and all administrative remedies have either been exhausted or expired, or
  • The IRS issued a levy.

According to the IRS’s website, certain debts collected by the IRS, such as child support and FBAR penalties, are not included in the determination of a seriously delinquent tax debt.

How will I know if I’m affected?

The IRS is required to notify a taxpayer in writing if it has certified a seriously delinquent tax debt to the State Department. Similarly, if the certification is reversed, the IRS is required to notify a taxpayer in writing.

You should be on the lookout for Notice CP 508C, which alerts affected taxpayers that the IRS has certified a seriously delinquent tax debt to the State Department.

What can I do to avoid jeopardizing my passport?

Taxpayers may breathe a short sigh of relief to find out that the State Department will hold a passport application for 90 days before denying a passport. Consequently, the 90-day delay will give you time to address your federal tax liability issues even after the IRS certifies your tax debt.

However, taxpayers may avoid the heartburn of the IRS certification process entirely by pursuing any of the following actions:

  • Entering into a collection alternative,
    • Full payment of the tax debt
    • Bankruptcy
    • Installment agreement
    • Offer in compromise
    • Currently not collectible status
  • Filing a Collection Due Process (CDP) hearing request, or
  • Requesting innocent spouse relief (under IRC 6015)

Also, taxpayers who are victims of identity theft or live in a federally declared disaster area may avoid enforcement against their passports.

Contact GPP for further information or questions regarding your IRS tax issues.

*The seriously delinquent tax debt threshold is indexed yearly for inflation and is currently $51,000.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article. 

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