TaxAudit Offers Guidance on Passport Revocation for Seriously Delinquent Taxpayers

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Once notified by the IRS, the State Department may begin the process of denying a taxpayer’s passport application – or revoking or limiting their already active passport for tax debts over $54,000.

As many Americans begin to make their first travel plans in over a year, TaxAudit, the nation’s largest tax representation service business, wants to send a word of caution to taxpayers. The IRS resumed the process of notifying the U.S. State Department about taxpayers with “seriously delinquent” tax debt. Once notified, the State Department may begin the process of denying a taxpayer’s passport application or revoking or limiting their already active passport.

For the purposes of this law, “seriously delinquent tax debt” is defined as legally enforceable tax debt which has been assessed, AND

  •     The debt is greater than $50,000, including assessed penalties and interest, indexed annually for inflation (For 2021, the threshold amount is $54,000.); AND
  •     The IRS has filed a Notice of Federal Tax Lien, and the taxpayer’s right to dispute the lien has been exhausted or lapsed; OR
  •     The IRS has issued a levy action.

In March 2020, when the United States and many other countries shut down due to the COVID-19 pandemic, the IRS placed a moratorium on certifying taxpayer debts as “seriously delinquent” to the State Department. Approximately one year later, on March 14, 2021, the IRS announced they would resume sending these notifications.

“When the pandemic started, the IRS initially suspended all IRS Collection activity. Even after the suspension on collection activity ended, we saw a more lenient IRS the last year or so. With the IRS resuming suspension of passports and talks in Congress of increasing the IRS enforcement budget, it appears the leniency is coming to an end,” said Arnold van Dyk, Esq. Director of Tax Services at TaxAudit.

If you have never heard of the passport revocation law, now is the time to get acquainted with the procedure, along with steps to take to help prevent your passport from becoming denied, revoked, or limited, especially if you currently owe the IRS at least $54,000. While the IRS has no authority to issue or deny any person’s passport, they can certify to the State Department that a taxpayer’s tax debt is seriously delinquent and request the State Department revoke a taxpayer’s passport. This certification process was included in the 2015 Fixing America’s Surface Transportation (FAST) Act.

Assessed tax debt includes the tax determined from the submission or audit of a taxpayer’s income tax return. It also includes the tax assessed on a Substitute for Return prepared by the IRS. Generally, the IRS will prepare a substitute for return when a taxpayer has a filing requirement and does not file their tax return. A substitute for return is also prepared when the IRS determines a taxpayer filed a false or fraudulent return.

At the same time the IRS notifies the State Department of the taxpayer’s certified seriously delinquent tax debt, the IRS mails the affected taxpayer IRS Notice CP508C, informing the taxpayer that their passport is in jeopardy of being revoked. This notice is sent to the taxpayer’s last known address on file with the IRS. (This is why it is essential to inform the IRS when you move. To update your current address with the IRS, submit IRS Form 8822, Change of Address.) Once they are notified, the State Department will place a 90-day hold on denying, revoking, or limiting a taxpayer’s passport, thereby allowing the taxpayer time to work with the IRS to resolve their unpaid liability.

Receiving notification of a taxpayer’s seriously delinquent tax debt does not automatically lead to an action against the taxpayer’s passport. If the taxpayer can agree with the IRS about the tax due within the State Department 90-day holding period, the IRS will decertify the debt as seriously delinquent. (Decertification is the process where the IRS reverses the determination that the taxpayer’s debt is seriously delinquent. The State Department will be notified of the decertification by the IRS.)

There are several ways a taxpayer can resolve their seriously delinquent tax debt status with the IRS in addition to making full payment of the tax due. Circumstances and actions that, by law, exclude a taxpayer’s account from being certified as seriously delinquent include:

  •     An account where the taxpayer is under a current Installment Agreement;
  •     An account where the taxpayer is under an Offer in Compromise, and the taxpayer is current on agreed to payments;
  •     An account where the taxpayer is under a settlement agreement with the Department of Justice and making timely payments;
  •     A delinquent tax account where the taxpayer has filed a timely Collection Due Process (CDP) hearing request. If a taxpayer misses the window to file a Collection Due Process hearing and files an Equivalent Hearing instead, the taxpayer’s account will not be automatically excluded from seriously delinquent tax debt certification;
  •     A delinquent tax account where the taxpayer filed for Innocent Spouse relief;
  •     While the taxpayer serves in a designated combat zone, the IRS will postpone notification to the State Department.

There are other circumstances where the IRS has the discretion to decide that a taxpayer’s debt will not be considered seriously delinquent for passport revocation purposes, even if the tax due is over the threshold. It is important to remember that these discretionary exclusions are not mandatory. The IRS has the authority to make changes to this list or choose not to exclude the certification of seriously delinquent tax debt. These discretionary circumstances include:

  •     Tax debt placed in Currently Not Collectible (CNC) status;
  •     Tax debt resulting from identity theft;
  •     Taxpayers who are located in a disaster zone;
  •     Tax debt that is in bankruptcy;
  •     Tax debt belonging to a deceased taxpayer;
  •     Tax debt included in a pending Offer in Compromise or Installment Agreement. However, if a taxpayer tries to enter into one of these plans for the sole purpose of delaying collection action, then the debt will be considered seriously delinquent for passport revocation purposes;
  •     A taxpayer who has a pending claim and the current balance due will be reduced to zero. A pending claim can include the submission of an amended return or audit reconsideration.

It is not uncommon for the IRS to make an erroneous certification leading to a taxpayer’s passport being revoked, denied, or limited in error. This is where the expertise of an experienced tax professional is vital, and the tax pros at TaxAudit have over 1,700 years of combined tax experience. Passport revocation or denial can be exceptionally detrimental to those taxpayers who rely on their passports to cross borders for work purposes or to live abroad. Erroneous certifications are often due to human error. For example, the IRS may not have noted in a taxpayer’s account that they have entered into an Installment Agreement or Offer in Compromise and have been compliant with their payments. Additionally, the IRS may be unaware that a soldier with seriously delinquent tax debt is currently serving in a combat zone.

Generally, it takes the IRS thirty days to decertify a taxpayer’s account. There are avenues available to taxpayers to expedite the decertification process. If the taxpayer has a valid emergency need to travel or the travel is for humanitarian reasons, the State Department may not deny, revoke, or limit a taxpayer’s passport. If a taxpayer has imminent travel plans (traveling within the next forty-five days or live abroad), the IRS may be able to shorten the decertification process time from thirty days to fourteen to twenty-one days. To do this, the taxpayer will need to inform the IRS immediately of their travel plans and provide:

  •     Proof of travel, such as a flight itinerary, international hotel reservation or car insurance, or documentation that shows the taxpayer has a time-sensitive need to travel, along with the destination and dates of travel; AND
  •     A copy of the letter the taxpayer received from the State Department denying their passport application or revoking/limiting their passport.

Passport revocations can not only disrupt a taxpayer’s vacation plans, but they can also impact their livelihood. And facing the IRS to resolve a tax dispute or unpaid tax liability can be daunting and frightening. With more than three decades of helping people resolve their tax audit and tax debt issues, TaxAudit strives to equip taxpayers with the tools they need to resolve their tax dilemmas. Their over 140 tax professionals, who have helped more than 350,000 taxpayers face the IRS and settle their tax disputes, are ready to assist taxpayers with passport revocations due to seriously delinquent tax debt.

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Danielle Miranda
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