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Delinquent Taxes Can Restrict Your Ability To Travel Outside The Country

We’ve previously written about a law enacted in December 2015 that authorizes the Secretary of State to deny the issuance or renewal of passports to “seriously delinquent” taxpayers. The purpose of the law is to use travel as a way to enforce tax collections.  Although, the new law hasn’t been officially implemented yet, the IRS recently provided some details.

Taxpayers with seriously delinquent taxes, can expect the IRS to certify this fact to the State Department (“Department”). After receiving certification from the IRS, the Department generally will not issue or renew a passport. At this time, the IRS has not begun certifying tax debt to the Department. The IRS expects to start certifications in early 2017.

If the Department makes a decision to revoke a passport, prior to revocation, it may limit your passport to return travel to the U.S.

Certification of Individuals with Seriously Delinquent Tax Debt

Seriously delinquent tax debt is unpaid, legally enforceable tax debt totaling more than $50,000 (including interest and penalties, but subject to an annual inflation adjustment) for which:

  • A Notice of federal tax lien has been filed and all administrative remedies have lapsed or been exhausted or
  • A Levy has been issued

Certain tax debt is not included in determining seriously delinquent tax debt. This includes tax debt that is:

  • Being timely paid under an installment agreement
  • Being timely paid under an offer in compromise
  • The subject of a collection due process hearing in connection with a levy to collect the debt
  • The subject of a request for innocent spouse relief for which collection has been suspended

Before denying a passport, the Department will hold your application for 90 days to allow you to:

  • Resolve any incorrect certification issues
  • Fully pay the tax debt
  • Enter into an acceptable payment alternative with the IRS

A grace period is not provided for resolving the debt before the Department revokes a passport.

Taxpayer Notification

The IRS is required to provide you with written notification (Notice CP 508C) at the time it certifies seriously delinquent tax debt to the Department. The IRS is also required to notify you in writing at the time it reverses certification.

Reversal of Certification

The IRS will notify the Department of the reversal of the certification (Notice CP 508R) when:

  • The tax debt is fully satisfied or becomes legally unenforceable.
  • The tax debt is no longer seriously delinquent.
  • The certification is erroneous.

The IRS will provide notice as soon as possible if the certification is incorrect. Notice will also be provided within 30 days of the date the debt is fully satisfied, becomes legally unenforceable or is no longer seriously delinquent tax debt. A previously certified debt is no longer seriously delinquent when:

  • You and the IRS enter into an installment agreement.
  • The IRS accepts an offer in compromise.
  • The Justice Department enters into a settlement agreement.
  • Collection is suspended because you request innocent spouse relief.
  • You make a timely request for a collection due process hearing in connection with a levy to collect the debt.

The IRS will not reverse certification where a taxpayer requests a collection due process hearing or innocent spouse relief on a debt that is not the basis of the certification. Also, the IRS will not reverse the certification because the taxpayer pays the debt below $50,000.

Judicial Review of Certification

If the IRS certified your debt to the State Department, you can file suit in the U.S. Tax Court or a U.S. District Court to have the court determine whether the certification is incorrect, or the IRS failed to reverse the certification when it was required to do so. If the court determines the certification is erroneous or should be reversed, it can order reversal of the certification.

Payment of Taxes

If you can’t pay the full amount you owe, you can make alternative payment arrangements such as an installment agreement or an offer in compromise and still keep your U.S. passport. If you disagree with the tax amount or the certification was made in error, you should contact the IRS using the telephone number shown on Notice CP 508C. If you’ve already paid the tax debt, you should send proof of that payment to the address on Notice CP 508C.

If you recently filed your tax return for the current year and expect a refund, the IRS will apply the refund to the debt and if the refund is sufficient to satisfy your seriously delinquent tax debt, the account is considered fully paid.

Passport Status

If you need to verify whether your U.S. passport has been cancelled or revoked, you should contact the State Department by calling the National Passport Information Center at 877-487-2778. If you need your U.S. passport to keep your job, once your seriously delinquent tax debt is certified, you must fully pay the balance, or make an alternative payment arrangement to keep your passport.

Once you’ve resolved your tax problem with the IRS, the IRS will reverse the certification within 30 days of resolution of the issue.

Travel

If you’re leaving in a few days for international travel and need to resolve passport issues, you should call the phone number listed on Notice CP 508C. If you already have a U.S. passport, you can continue to use your passport until notified by the State Department that it’s taking action to revoke or limit your passport.

We’ll keep you updated when more information about the implementation date becomes available. If you have delinquent taxes that need to be resolved, call us today for your FREE consultation. We can help!

Contact Us 

You deserve the best in IRS tax representation, tax preparation, and tax planning services. At East Coast Tax Consulting Group, you’ll work with a licensed CPA who will handle your case from beginning to end. We invite you to contact our team to schedule a free, confidential consultation.

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