January 2018 JD Supra
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The IRS’s ability to deny or revoke the Passports of Taxpayers with significant tax debts is one of the Most Serious Problems encountered by Taxpayers – JD Supra.

The U.S Department of State is required to deny an individual’s passport application and is authorized to revoke or limit an existing passport if the IRS has certified that the individual has seriously delinquent federal tax debt under the FAST Act approved in 2015.  The definition of seriously delinquent tax debt is:

  • an “unpaid, legally enforceable federal tax liability of an individual,” which has been assessed;
  • Is greater than $50,000 (adjusted for inflation); and meets either of the following criteria:

(1) A notice of lien has been filed under Internal Revenue Code (IRC) § 6323 and the Collection Due Process (CDP) hearing rights under IRC § 6320have been exhausted or lapsed; or

 (2) A levy has been made under IRC § 6331.

The 2017 National Taxpayer Advocate “Annual Report to Congress”, acknowledges that the implementation of this law that denies or revokes the passports of taxpayers with significant tax debts is a serious problem and estimates that approximately 270,000 Taxpayers meet the criteria for a seriously delinquent tax debt. 

There are statutory exceptions or discretionary exclusions to the IRS certifications to the U.S. Department of State. 

Statutory Exceptions include a Debt that:

  • is being timely paid through an Installment Agreement (IA) or Offer in Compromise (OIC)
  • collection is suspended because the taxpayer requested a Collection Due Process (CDP) hearing or a CDP hearing is pending
  • collection is suspended because the taxpayer has requested relief from joint liability (innocent spouse relief)

Discretionary Exclusions for Debts that:

  • Are determined to be in currently not collectible (CNC) status due to hardship
  • Result from identity theft
  • Belong to a taxpayer in a disaster zone
  • Belong to taxpayer in bankruptcy
  • Belong to a deceased taxpayer
  • Are included in a pending Offer in Compromise (OIC) or pending Installment Agreement (IA)
  • For which there is a pending claim and the resulting adjustment is expected to result in no balance due.

The Law can:

  • delay certifications for taxpayers in a combat zone
  • provide exceptions allowing the Department of State to issue a passport in emergency circumstances or for humanitarian reasons

The IRS must reverse the certification to the Department of State and notify the Department of State and the taxpayer under the criteria that:

  • a certification is found to be erroneous
  • the debt is fully satisfied
  • the debt becomes legally unenforceable
  • the debt ceases to be a seriously delinquent tax debt due to a statutory exception

The IRS will systemically send the certifications and decertification’s to the Department of State on a weekly basis, with decertification’s required by law to generally be sent within 30 days of a taxpayer meeting the criteria. 

Taxpayers facing seriously delinquent debt feel overwhelmed and procrastinate.  IRS is understaffed and is pursuing Taxpayers who are already actively trying to resolve their tax problems.  IRS is NOT sending separate and stand-alone pre-certification notices that could potentially provide taxpayers with the right to challenge the IRS’s position and be heard.

Don’t be a victim of your own making.  Taxpayers have a constitutional right to travel.  Don’t let the State Department and I.R.S. block your freedom to travel.  If you have tax debts, or if you are out of compliance, please consult your tax specialist now.