In January 2018, the IRS implemented more aggressive collection measures for people with what it described as “seriously delinquent” tax debts. This change, which applies to those who owe over $52,000, appeared as part of the Fixing America’s Surface Transportation (FAST) Act, can result in revocation of your passport.
According to CBS News, the State Department has already denied passports to a number of debtors, and the IRS indicated that 220 people have remitted over $11.5 million to avoid passport cancellation or denial.
What is a Seriously Delinquent Tax Debt?
Those who risk passport cancellation generally meet the following criteria:
- They owe over $52,000 in tax arrears, penalties, and interest
- The IRS has sent them a Notice of Federal Tax Lien and the deadline for challenging the lien has passed OR
- A levy has been issued
The IRS has stated that it will not certify a taxpayer as seriously delinquent if they are:
- In bankruptcy
- A victim of tax-related identity theft
- Experiencing hardship that makes their debt uncollectible
- Located in a federally declared disaster area
Taxpayers serving in a combat zone will also not risk passport denial during their time of service.
What is the Process?
When the IRS certifies you to the State Department as a seriously delinquent taxpayer, they will also send you a Notice CP508C, which explains what you need to do to address the debt and resolve the situation. This notice is sent to your last known address and provided to you only: if you have a power of attorney, they will not receive a copy.
Before denying your passport application or renewal, the State Department will hold your application for 90 days to give you time to pay the debt, reach a satisfactory payment arrangement with the IRS, or clear up any erroneous certification. If this deadline passes without any resolution, the State Department will notify you in writing that your passport application is denied or your existing passport is revoked. If you are overseas when this happens, the State Department may provide you with a special passport good only for your direct return to the U.S.
Once you pay in full or agree to a payment arrangement, the IRS will reverse your certification within 30 days, so that your passport is no longer at risk. If you have an urgent need to travel, the IRS can notify the State Department to remove the certification from your record more quickly.
How to Prevent Loss of Your Passport
There are several ways that you can avoid passport denial or cancellation due to tax debt delinquency. They include:
- Paying the tax debt in full.
- Proposing a payment plan. Debtors who owe less than $100,000 in combined tax, penalties and interest can propose a short-term payment plan in which you pay the tax debt in 120 days or less.
- Proposing an installment agreement if you need more than 120 days to pay. You advise the IRS how much you can afford to pay every month and if your plan is approved, it will add a fee to your debt. The amount depends on how you apply (online vs. phone or mail) and how you make payments.
- An offer in compromise, which is when you offer to settle the debt for a lower amount. This relief is generally more difficult to qualify for and the IRS will only accept if it determines that it can collect more from you through an offer in compromise than it could over 10-year collection statute.
- Requesting innocent spouse relief. If you believe that the tax debt was incurred because your spouse omitted or improperly reported items on your tax return, you can be relieved of responsibility for paying tax, interest, and penalties.
Appealing a Certification
If the IRS certified your tax debt to the State Department and you disagree with the decision, you can file suit in the U.S. Tax Court or a District Court. If the court concludes that the certification is unjustified, it can order the IRS to notify the State Department that the certification was erroneous.
Contact a New Jersey Tax Debt Attorney
If you believe that you will soon be subject to a passport restriction because you owe money to the IRS, don’t wait until you need to travel aboard again. Contact a New Jersey tax debt attorney who can go over the various IRS payment plans and advise you on the recommended solution for your tax situation.
Attorney Brad Paladini at Paladini Law negotiates tax debt payments for his clients on a regular basis and will help you propose a resolution that’s likely to be accepted. For more information, please contact us or call 201-381-4472.
