Passports and Seriously Delinquent Tax Debt
According to the IRS website, seriously delinquent tax debt is about to become a problem for US travelers. Starting as early as March of this year, the US State Department might not issue or renew a passport for you. Under law about to be implemented, upon notice from the IRS, the State Department may deny, cancel, or revoke your passport. If the State Department does take such action against you, it may also limit your passport to solely permit return travel to the US.
While not new, the applicable legislation was actually passed by Congress in 2015, the idea is to use passports as leverage to compel payment of taxes. Internal Revenue Code §7345 authorizes the IRS to certify to the State Department that you have a seriously delinquent tax debt, with potentially adverse consequences for your travel plans.
What is a Seriously Delinquent Tax Debt?
Seriously delinquent tax debt is an individual’s unpaid, legally enforceable, federal tax debt totaling more than $50,000.00 including interest and penalties and adjusted for inflation, for which a:
1. Notice of federal tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted; or
2. Levy has been issued.
Some tax debt is not included in determining seriously delinquent tax debt, even if it meets the above criteria. That includes tax debt:
1. Being paid in a timely manner under an installment agreement with the IRS;
2. 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;
3. For which a collection due process hearing is timely requested in connection with a levy to collect the debt; or
4. For which collection has been suspended because a request for innocent spouse relief under IRC §6015 has been made.
Taxpayer Notification – Notice CP 508C
The IRS is required to notify you in writing at the time the IRS certifies seriously delinquent tax debt to the State Department. The IRS is also required to notify you in writing at the time it reverses certification. The IRS will send written notice by regular mail to your last known address.
Your Opportunity to Cure
Before denying you a passport, the State Department will hold your application for 90 days to allow you time to:
1. Resolve any erroneous certification issues;
2. Make full payment of the tax debt; or
3. Enter into a satisfactory payment alternative with the IRS.
Note, however, that there will be no grace period for resolving the debt before the State Department revokes a passport.
If your U.S. passport application is denied or your passport is revoked, the Department of State will notify you in writing.
If you need your U.S. passport to keep your job, once your seriously delinquent tax debt is certified, you must either 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.
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 use your passport until you’re notified by the State Department that it’s taking action to revoke or limit your passport.
If the Secretary of State decides to revoke a passport, the Secretary of State, before making the revocation, may:
1. Limit a previously issued passport only for return travel to the United States; or
2. Issue a limited passport that only permits return travel to the United States.
If your passport is cancelled or revoked, after you’re certified, you must resolve the tax debt by paying the debt in full, making alternative payment arrangements or showing that the certification is erroneous.
Guidelines provide that the IRS will notify the State Department of the reversal of your certification within 30 days of the date the tax debt is resolved.
Reversal Of Certification – Notice CP 508R
Under Notice CP 508R, the IRS will notify the State Department of the reversal of the certification when:
1. The tax debt is fully satisfied or becomes legally unenforceable;
2. The tax debt is no longer seriously delinquent; or
3. The certification is erroneous.
IRS guidelines provide that notice will be given as soon as practicable if the certification is erroneous. The IRS will provide notice within 30 days of the date the debt is fully satisfied, becomes legally unenforceable or ceases to be seriously delinquent tax debt.
A previously certified debt is no longer seriously delinquent when:
1. You and the IRS enter into an installment agreement allowing you to pay the debt over time.
The IRS accepts an offer in compromise to satisfy the debt;
2. The Justice Department enters into a settlement agreement to satisfy the debt;
3. Collection is suspended because you request innocent spouse relief under IRC § 6015; or
4. 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 erroneous 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.
IRC § 7345 does not provide the court authority to release a lien or levy or award money damages in a suit to determine whether a certification is erroneous. You are not required to file an administrative claim or otherwise contact the IRS to resolve the erroneous certification issue before filing suit in the U.S. Tax Court or a U.S. District Court.
If you, or someone you know, receive a Notice CP 508C from the Internal Revenue Service, contact an experienced New York tax attorney at Mackay, Caswell & Callahan, P.C. today. With over 30 years’ of tax experience and offices throughout New York State, we can offer experienced tax help.