This article is reproduced with permission from Spidell Publishing, Inc.
Note: Although the exact date is uncertain, the IRS will soon be reporting delinquent tax debts to the State Department.
Starting this year, the IRS will be reporting individuals with “seriously delinquent tax debts” to the State Department for denial or revocation of a passport.
The Fixing America’s Surface Transportation Act of 2015 (FAST Act) added Internal Revenue Code (IRC) Section 7345, which provides the IRS with the ability to deny or revoke the passport of any American taxpayer with a seriously delinquent tax debt. That is a debt in excess of $50,000, including penalties and interest, for which a notice of lien or levy has been filed. The $50,000 threshold is indexed yearly for inflation. The IRS has not yet begun certifying delinquent tax debts to the State Department, but their website says they plan to do so in “early 2017.” Once implemented, they will post the news on this page: www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes.
A taxpayer will no longer be considered seriously delinquent for the purpose of passport revocation if:
- the debt is being paid in a timely manner under an installment agreement entered into with the IRS;
- the debt is being paid in a timely manner under an offer in compromise accepted by the IRS or a settlement agreement entered into with the Justice Department;
- a collection due process hearing is timely requested in connection with a levy to collect the debt; or
- collection has been suspended because a request for innocent spouse relief under IRC Section 6015 has been made.
Notification and debt resolution
Before denying a passport application, the State Department will hold the application for 90 days to allow the taxpayer to resolve any issue or pay the tax in full or enter into a payment agreement with the IRS. The State Department will notify taxpayers in writing if their passport applications have been denied or their passports revoked. Taxpayers with seriously delinquent tax debts can use their passports until they receive notification from other State Departments. If a passport is revoked while a taxpayer is overseas, they will not be stranded; the State Department will issue a limited validity passport that will allow the taxpayer direct return to the United States. Once taxpayers have resolved their tax debts, the IRS will reverse the certification with the State Department within 30 days of receiving payment. Payment must be made in full, or the taxpayer must enter into a payment arrangement as described above. The IRS will not reverse the certification because the taxpayer pays down the debt below $50,000.
Real ID Act
Until January 22, 2018, if traveling by air, residents from ANY state may still use a driver’s license or any of the various other forms of identification accepted by the Transportation Security Administration (TSA). The Department of Homeland Security website has lists of states that are currently compliant, states with various extensions, and noncompliant states:
www.dhs.gov/current-status-states-territories
Effective January 22, 2018, if an individual has a driver’s license or identification card issued by a state that does not meet the requirements of the REAL ID Act, unless that state has been granted an extension, the individual must present an alternative form of identification acceptable to TSA in order to board a commercial domestic flight. Starting October 1, 2020, anyone traveling by air on a domestic flight will need a form of ID that is compliant with the requirements set out in the REAL ID Act. This could affect the travel ability of taxpayers who live in states that issue noncompliant driver’s licenses, although there are other forms of acceptable federal identification listed at:
www.tsa.gov/travel/security-screening/identification
This means that, barring changes to the licenses in those states to bring them into compliance, passengers will most likely be using passports to board domestic flights.
For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at 844.4WINDES (844.494.6337).