Taxpayers who may lose their passports

Tax tips from IRS

Revocation or Denial of Passport in Case of Certain Unpaid Taxes

According to the Internal Revenue Service (IRS):

If you are seriously delinquent in your tax debt, IRC § 7345 authorizes the IRS to certify that to the State Department, which in turn usually will not issue or renew your passport after receiving certification from the IRS.

Upon receiving the IRS certification, the State Department may revoke your passport. If the department decides to revoke it, or limit your passport to travel to the US, prior to revocation.

Certification Of Individuals With Seriously Delinquent Tax Debt

Seriously delinquent tax debt is an individual’s unpaid, legally enforceable federal tax debt totaling more than $50,000 (including interest and penalties) for which a:

2) Notice of federal tax lien (see https://zflegal.com/services/federal-tax-liens/   ) has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted or

2) Levy (see https://zflegal.com/services/federal-tax-levies/ ) has been issued

Some type of tax debt is not included in determining seriously delinquent tax debt even if it meets the above criteria. It includes the following ax debt:

1) Being paid in a timely manner under an installment agreement entered into with the IRS

2) Being paid in a timely manner under an offer-in-compromise (see https://zflegal.com/services/offer-in-compromise-oic/ ) 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 regarding a levy to collect

4) For which collection action has been suspended under the innocent spouse relief; IRC § 6015 (see https://zflegal.com/services/innocent-spouse-relief/)

Before denying a passport, the State Department will hold your application for 90 days to allow you to:

1) Resolve any erroneous certification issues

2) Make full payment of the tax debt

3) Enter into a satisfactory payment alternative with the IRS

There is no grace period for resolving the debt before the State Department revokes a passport.

Annual Adjustment For Inflation

The $50,000 threshold is indexed yearly for inflation.

Under new Code Section 7345(f), in the case of a calendar year beginning after 2016, the dollar amount in new Code Section 7345 shall be increased by an amount equal to:

(1) Such dollar amount, multiplied by

(2) The cost-of-living adjustment determined under Code Section 1(f)

(3) For the calendar year, determined by substituting “calendar year 2015” for “calendar year 1992” in Code Section 1(f)(3)(B).

If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the nearest multiple of $1,000.

Taxpayer Notification – Notice CP 508C

The IRS must notify you in writing at the time it certifies seriously delinquent tax debt to the State Department. The IRS is also must notify you in writing at the time it reverses certification. The IRS will send written notice by regular mail to your last known address.

Reversal Of Certification – 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.

3) The certification is erroneous.

The IRS will provide notice 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 plan agreement.

2) The IRS accepts an offer-in-compromise.

3) The Justice Department enters into a settlement agreement to satisfy the tax debt.

4) Collection action has been suspended because you request for innocent spouse relief.

5) You make a timely request for a collection due process hearing regarding a levy.

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 tax 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 ask the IRS to resolve the erroneous certification issue before filing suit in the U.S. Tax Court or a U.S. District Court.

Payment Of Taxes

If you can’t pay the full amount you owe, you can make alternative payment arrangements such as an installment plan or an offer-in-compromise and still keep your U.S. passport.

If you disagree with the tax amount or the certification was made in error, you should contact the phone number listed on Notice CP 508C. If you have already paid the tax debt, please send proof of that payment to the address on the Notice CP 508C.

If you recently filed your tax return for the current year and expect a refund, the IRS will apply the refund to the tax debt and if the refund is sufficient to satisfy your seriously delinquent tax debt, the account is considered fully paid.

Passport Status

If your U.S. passport application is denied or your U.S. 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 fully pay the balance, or make an alternative payment plan to keep your passport.

Once you have resolved your tax debt problem, the IRS will reverse the certification within 30 days of resolution of the issue.

Travel

If you are leaving the US in a few days for international travel and need to resolve passport issues, you should call the phone number listed on Notice CP 508C immediately. If you already have a U.S. passport, you can use your passport until you are notified by the State Department that it is taking action to revoke or limit your passport.

If the Secretary of State decides to revoke a passport, before making the revocation, it may—

(a) Limit a previously issued passport only for return travel to the US; or

(b) Issue a limited passport that only permits return travel to the US.

If your passport is cancelled or revoked, after you are certified, you must resolve the tax debt by paying the debt in full, making alternative payment plan or proving the certification is erroneous.

The IRS will notify the State Department of the reversal of your certification within 30 days of the date the tax debt is resolved.

Zaher Fallahi, Tax Attorney, CPA, assists taxpayers with serious tax debt, tax levy, tax lien, offer-in-compromise and innocent spouse relief. Telephones:  (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County) or e-mail taxattorney@zfcpa.com