Starting January 2018, The United States Government is sending out certifications pertaining to passport revocation for seriously delinquent tax debts. This means that if a U.S. citizen owes more than $51,000, ($50,000 adjusted for inflation since date of enactment), in back taxes including penalties and interest, (a “seriously delinquent tax debt”); the U.S. State Department might deny their application for issuance or for a renewal of their U.S. passport and may revoke or limit a previously issued passport. If the Internal Revenue Service (IRS) has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.
This is basically the implementation of the provisions of the Fixing America Surface Transportation (FAST) Act, that was signed into law back in December 2015, and yet another way to ensure tax compliance and to detect tax invaders. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing seriously delinquent tax debt.
It’s important to note that the $51,000 minimum debt amount includes interest and penalties. In this regard, if you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty for each month or part of a month after the due date that the taxes are not paid. Consequently, it may not be very difficult for taxpayers to cross the $51,000 of unpaid tax.
Some tax debt is not included in determining seriously delinquent tax debt, it includes tax debt:
Being paid in a timely manner under an installment agreement entered into with the IRS.
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.
For which a collection due process hearing is timely requested in connection with a levy to collect the debt.
For which collection has been suspended because a request for innocent spouse relief under IRC §6015 has been made.
The IRS is required to notify the taxpayer in writing by regular mail, to his last-known address that they are certified as owing seriously delinquent tax debt. This form is known as Notice CP 508C. At the same time, the IRS will send the certification to the State Department.
Before denying a passport, the State Department will hold the passport application for 90 days to allow the taxpayer to:
Resolve any erroneous certification issues;
Make full payment of the tax debt; or
Enter into a satisfactory payment alternative with the IRS.
It is important to note that there is no grace period for resolving the debt before the State Department revokes a passport. But the State Department may decide, before making the revocation, to limit a previously issued passport only for return travel to the United States or issue a limited passport that only permits return travel to the United States. This limitation can be problematic for U.S. citizens living abroad who have tax delinquencies and for U.S. citizens who travel overseas for work.
Once the taxpayers’ U.S. passport application is denied or revoked, the State Department will notify the taxpayer in writing.
To get out of the passport restriction, taxpayers must get back into good standing with the IRS. If the taxpayer can’t pay the full amount they owe, they can make alternative payment arrangements such as an installment agreement or an offer in compromise and still keep their U.S. passport.
If a taxpayer recently filed his tax return for the current year and is expecting a refund, the IRS will apply the refund to the debt and if the refund is sufficient to satisfy the seriously delinquent tax debt, the account is considered fully paid.
Once the tax issue is resolved with the IRS, the IRS will notify the taxpayer in writing by sending him Notice CP 508R, informing him that he is no longer on the certification list.
If a taxpayer disagrees with the tax amount or the certification was made in error, they should contact the phone number listed on Notice CP 508C. If they have already paid the tax debt, they should send proof of that payment to the address on Notice CP 508C.
Alternatively, the taxpayer 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. Take into account that during this time, the taxpayers passport remains restricted until the court decides otherwise.
The IRS will reverse the taxpayers’ certification within 30 days of the date the tax debt is resolved and provide notification to the State Department as soon as practicable. Upon receipt, the State Department will remove the certification from the taxpayer’s record.
Passports are not only needed for traveling on vacation abroad, many taxpayers need their passports for traveling abroad for work purposes, sometimes on a monthly basis. Revocation of their passports will leave these taxpayers without this essential capability. The IRS is strongly encouraging taxpayers to make sure they are not behind on their taxes, and pay what they owe in order to avoid putting their passports at risk. So, before you book your next holiday or sign up for that next important conference abroad, make sure you are compliant with your U.S. taxes. Taxes and traveling, just like the song, they go together like a horse and carriage, because apparently you can’t have one without the other..
The content of this article is intended to provide a general guide to the subject matter and is not a substitute for legal consultation. Specific legal advice should be sought in accordance with the particular circumstances.