At $54,000 (as of 2021 and adjusted each year for inflation), your tax debt—which includes penalties and interest—becomes “seriously delinquent” under Internal Revenue Code 26 USC 7345: Revocation or denial of passport in case of certain tax delinquencies. At this point, the IRS has filed a lien or issued a levy in order to collect your debt.
Seriously Delinquent Tax Debt
Under the Fixing America’s Surface Transportation (FAST) Act enacted in 2015, your status as seriously delinquent with the IRS is shared with the State Department. You’ll receive Notice CP508C at the same time. While this sounds harmless enough, it can actually limit your ability to travel overseas by restricting your ability to get a passport. It’s important to note that a copy of this Notice will not be sent to your Power of Attorney, even if they’re already addressing your back taxes. You’ll need to share this information with your Power of Attorney so they can help determine the best course of action.
After the State Department is made aware of your back taxes, you’ll be impacted by what you may know as the “tax debt travel ban.” You won’t be able to travel overseas due to your inability to get a new passport or renew an existing one. You may even have your current, valid passport revoked. Thankfully, the State Department will wait 90 days between receiving notice of your back taxes and taking action. This gives you time to resolve your tax debt using one of many tax resolution strategies.
When the IRS sends you Notice CP508R, you’ll once again be able to apply for and use a passport to travel internationally. This usually occurs within 30 days of coming to an agreement with the IRS about how you’ll resolve your debt. Individuals who need their passports sooner may be able to expedite this process. For example, if you live abroad or already have travel plans (with proof), the 30 day processing time could be cut in half.
Like most tax laws, there are exceptions to the tax debt travel ban. The FAST Act states you may still be able to travel with your passport “in emergency circumstances or for humanitarian reasons.” In actuality, there are many situations in which you can still apply for and use a passport, and therefore travel, even if you owe back taxes. If one of these situations applies to you, you may not be subject to passport restrictions.
- You’re in bankruptcy.
- You are in the process of coming to a tax resolution agreement with the IRS.
- You’re making payments toward your tax debt via an Offer in Compromise or Installment Agreement.
- You’re in Currently Not Collectable status or requesting Innocent Spouse Relief.
- You were a victim of tax-related identity theft.
- You live in a federal disaster zone.
It’s important to keep in mind that these exceptions are just temporary. The threat of passport limitations based on your tax debt is only gone when your back taxes are taken care of. In order to maintain your ability to travel with tax debt, ensure you continue to make any necessary payments and communicate with the IRS about your situation. For help resolving your tax debt for good, contact the tax resolution professionals at East Coast Tax Consulting Group.