Delinquent Tax Debt May Restrict Passport

It may prohibit your ability to travel abroad, if you have seriously delinquent tax debt. This is based on information obtained from IRS data. In 2011, the Government Accountability Office determined that by using passports to its advantage, it could actually get nearly $66 billion from unpaid taxes. Almost 225,000 taxpayers could be affected.

Congress was called upon to move forward with the coordination between the IRS and the State Department. This would close the gap on the outstanding tax debts. The agreement between the two departments became law in 2015.

IRC Section 7345 requires the IRS to identify and “certify” individuals who have “seriously delinquent tax debt.” Also, they are instructed to provide this certification to the State Department. In turn, the State Department can deny, revoke, or limit use of the individuals’ passports. This will remain in effect until they get into good standing with the IRS.

Taxpayers owing taxes of more than $50,000 may be affected by this new collection effort. Between the IRS and the State Department, you may find yourself unable to travel out of the country. Avoid getting caught in the mix of things. Taxpayers are urged to contact the Internal Revenue Service. There may be several solutions available to you. If you are uncomfortable calling the IRS, seek professionals.

One of the solutions is to set up a payment plan with the IRS. While setting up a payment plan may be quite simple, it is time consuming. Taxpayers often prefer that a qualified tax expert. And this is particularly true, if the taxpayer is unable to pay the amount, based on the standard IRS guidelines. Business & Financial Solutions is here to help.

The IRS will also make an exception during the period where the collection due process is suspended. This may be done through the Offer In Compromise process. The IRS will not, during this time, actively seek collections of your tax bill.

People who appeal a levy through an IRS collection due process hearing may be an exception. Our lawmakers allow taxpayers to appeal a levy or lien.  Consequently, the collection is suspended and the government will not impose passport restrictions. Taxpayers who dispute levies through the CDP hearing will not be certified as individuals with seriously delinquent tax debt. However, this reprieve is only until the hearings is completed. However, the reprieve only continues if the appeal is won.

In any case, any taxpayer who may think that they qualify for the Innocent Spouse Rule may be exempt. Such exempt individuals do not go on the State Department’s certified list. If you have filed for innocent spouse relief, and you are waiting for a response on your case, this would suspend the CDP action. The federal government would allow for the determination before certifying you on the passport list.

The State Department will allow taxpayers time to resolve there issues with past due tax debts. In March of 2015, they started sending out Letter 508C, Notice of certification of your seriously delinquent federal tax debt to the State Department. This letter is the first warning provided by the State Department. It provides ample time for you to seek resolution. However, the State Department has the authority to deny issuance or renewal of a passport. It may fully restrict or limit its use. The State Department will notify the taxpayer in a separate letter about the passport restrictions

The State Department may limit the use of a passport to those citizens traveling back to the United States, before revoking a passport. Much of the details and specifics around this are not yet clear in my eyes. They may not even be clear to the lawmakers. Nevertheless, it appears that the State Department will use its own discretion on the limiting and revocation of passports.

Any taxpayer applying for a new passport may run into issues. Anyone renewing a passport may run into issues. The FAST Act requires the State Department to deny the passport to any individual with seriously delinquent tax debt. Before denying the issuance of a passport, the State Department must hold the passport application for 90 days. This should provide the taxpayer with ample time to reach a resolution of some sort. Taxpayers are urged to act quickly, and not procrastinate.