Resolve Tax Debt to Avoid Putting Your Passport in Jeopardy
In December 2015, the Fixing America’s Surface Transportation (FAST) Act was passed. Within it was a provision allowing the IRS to inform State Departments of an individual’s seriously delinquent tax debt and to deny an individual’s application or renewal of a passport. In addition, current passport holders could have their passports revoked or their ability to travel restricted under certain situations.
The IRS began sending certifications of unpaid tax debt to the State Departments in February 2018 and are again reminding taxpayers of this new law, how it works, and the related consequences.
How It Works
The IRS identifies individuals with seriously delinquent unpaid tax debt. An individual with seriously delinquent tax debt is one who:
- Owes more than $52,000 of income tax (adjusted for inflation each year), including interest and penalties
- A Notice of federal tax lien has been filed and all administrative remedies have lapsed or been finalized, or
- A tax levy has been issued
Once such individuals have been identified, the IRS will send Notice CP508C to the taxpayer informing them the IRS has sent certification of their seriously delinquent tax debt to the State Department for potential action and encourages the taxpayer to respond to the notice and resolve their tax debt.
An individual can either pay the amount in full or set up a payment plan or other arrangement with the IRS at which point the IRS will issue another notice “reversing” the original certification by issuing Notice CP508R.
Consequences of the Law
If an individual does not take any action to resolve their seriously delinquent tax debt their original or renewal application for a passport will be denied by their respective State Department. However, before doing so, the State Department will hold the application for 90 days to allow the taxpayer to resolve their tax issue and/or debt.
In certain circumstances the IRS might request the State Department to revoke an individual’s current passport. For example, a taxpayer that could settle their debt using offshore activities or interests but chooses not to, or who is not complying with their previously agreed upon payment agreement.
If the IRS does recommend revocation of a current passport, they will send Letter 6152 – Notice of Intent to Request US Department of State Revoke Your Passport to the taxpayer informing them of the proposed revocation at which point the taxpayer will have 30 days to contact the IRS and make a good-faith attempt to resolve their tax debts.
Generally, the IRS will not send a certification of being seriously delinquent or may reverse a previous certification if:
- The taxpayer is in bankruptcy
- The taxpayer has been identified as a victim of tax-related identity theft
- The IRS has determined the taxpayer’s account is currently uncollectable due to hardship
- The taxpayer is located in a federally declared disaster area
- The taxpayer has a request pending with the IRS for an installment agreement, offer-in-compromise, or other accepted adjustment to satisfy the debt
- The taxpayer is currently serving in a combat zone
Due to the obvious travel restrictions it imposes, this provision can severely impact individuals who must travel frequently due to their employment or even individuals who wish to travel outside the US for vacation or other personal reasons. While the IRS does offer some options for expedited processing of reversing delinquent tax certifications, the volume of requests and specific taxpayer situations may present difficulty for the IRS to meet such requests and is why swift action should be taken to resolve seriously delinquent unpaid tax debt before the IRS puts your passport in jeopardy.
Steven C. Wedge, CPA
+1 (248) 244-3220