The IRS has urged travelers with seriously delinquent tax debt to either pay the taxes owed or enter into payment agreements to avoid jeopardizing their U.S. passports. The warning came shortly after the IRS issued guidance cautioning taxpayers that the U.S. State Department could deny a passport application or renewal or even revoke a taxpayer’s passport for having a seriously delinquent tax liability.
Comment. Although passport certification has been on the books for several years, the IRS is only now moving forward. Certifications to the State Department will begin this month, the IRS reported on its website. Affected taxpayers will receive CP 508C. The notice advises affected taxpayers that the IRS has certified seriously delinquent tax debt to the State Department.
The Fixing America’s Surface Transportation Act of 2015 (FAST Act) included several revenue raisers to help offset the cost of highway and transportation spending. One offset requires the Treasury Department, upon receiving certification by the IRS that any individual has a seriously delinquent tax debt, to transmit the certification to the State Department for action with respect to denial, revocation, or limitation of a passport for the individual. The FAST Act prohibits the State Department, upon receiving the certification, from issuing a passport except in emergency circumstances or for humanitarian reasons. The FAST Act also requires the State Department to revoke a passport previously issued; but allows a limited passport for return travel to the U.S.
Seriously Delinquent Tax Debt
Generally, a taxpayer with a seriously delinquent tax liability owes the government more than $50,000 in back taxes, penalties and interest for which:
- The IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired, or
- The IRS has issued a levy.
Comment. The $50,000 threshold is indexed yearly for inflation. The inflation-adjusted amount is now $51,000.
Taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax liability by:
- Paying the tax owed in full;
- Entering into an installment agreement;
- Making an offer-in-compromise that is accepted; or
- Entering into a settlement agreement with the Justice Department.
Also, having collection suspended because of a pending Collection Due Process (CDP) hearing, by making an innocent spouse election or requesting innocent spouse relief, will prevent the IRS from notifying the State Department of a taxpayer’s seriously delinquent debt. Further, a passport will not be at risk under this program for any taxpayer who is in bankruptcy, a victim of identity theft, in currently noncollectible status due to hardship, or in a federally declared disaster area.
Comment. The IRS will postpone notifying the State Department about taxpayers with seriously delinquent debt who are serving in combat zones.
Comment. If the IRS reverses its certification, affected taxpayers will receive CP508R. The notice informs recipients that the IRS reversed the certification of their tax debt as seriously delinquent, and notified the State Department of that reversal.