July 2022 Foodman Website and JD Supra
U.S. passport image

A Taxpayer’s U.S. Passport could be in jeopardy if the U.S. Taxpayer has seriously delinquent tax debt.  The law authorizes the IRS to certify seriously delinquent tax debt to the U.S. State Department for the State Department to take action.  The action that the State Department can take is to deny a delinquent U.S. Taxpayer’s U.S. passport application, deny renewal of their passport and revoke their passport.  In sum, the IRS can block a U.S. Taxpayer’s freedom to travel. That said, US Taxpayers that come forward to the IRS to arrange payment of their seriously delinquent tax debt before the IRS notifies the U.S. State Department stand to achieve a better outcome regarding the potential revocation or denial of a U.S. passport because of unpaid taxes.

What is Seriously delinquent tax debt?

IRS defines it as an individual taxpayer’s unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $55,000 (adjusted yearly for inflation) for which a:

  • Notice of federal tax lien has been filed and all administrative remedies under the law have lapsed or have been exhausted, or
  • Levy has been issued.

It includes U.S. individual income taxes, Trust Fund Recovery Penalties, business taxes for which the individual taxpayer is liable and other civil penalties.

Taxpayers are Notified via IRS Notice CP508C

The IRS is required to notify Taxpayers in writing at the time that the IRS certifies seriously delinquent tax debt to the U.S. State Department. IRS sends written notices by regular mail to the Taxpayer’s last known address. A Taxpayer’s Power of Attorney (POA) representative does NOT receive a copy of the CP508C.

Before denying a U.S. passport, the State Department will hold a Taxpayer’s application for 90 days to allow the Taxpayer to:

  • Resolve any erroneous certification issues
  • Make full payment of the tax debt
  • Enter a satisfactory payment arrangement with the IRS

Reversal of certification

The IRS will send a Taxpayer Notice CP508R at the time it reverses certification. The IRS will reverse a certification when:

  • The tax debt is fully satisfied or becomes legally unenforceable,
  • The tax debt is no longer seriously delinquent, or
  • The certification is erroneous.

The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable.

Don’t Jeopardize Your Passport: The US State Department Is Held Harmless!

The U.S. State Department is held harmless in U.S. Passport matters and cannot be sued for any erroneous notification or failed decertification under the law. If the IRS certified a Taxpayer’s debt to the State Department, a Taxpayer could 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 whether 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 the IRS to notify the State Department that the certification was in error.

IRS states that: the law doesn’t give the court authority to release a lien or levy or award money damages in a suit to determine whether a certification is erroneous. You’re not required to file an administrative claim or otherwise contact the IRS to resolve the erroneous certification issue before filing suit in the U.S. Tax Court or a U.S. District Court”.

Taxpayers ought to avoid having the IRS notify the State Department of their seriously delinquent tax debt by:

  • Paying the tax debt in full
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having requested or have a pending collection due process appeal of a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

Taxpayers may not learn the IRS has certified their tax debts until after certification

IRS is understaffed and may be pursuing Taxpayers who are already actively trying to resolve their seriously delinquent tax debt non-payment problems. Taxpayers ought to consider that:

  • 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.
  • There are timing issues that further jeopardize a Taxpayer’s U.S. passport.
  • The National Taxpayer Advocate report stated that there are Taxpayers that have received CP508C notices despite the fact that a Taxpayer’s tax liability had been paid in full, as well as Notices one month after a liability was paid in full, or after having an existing installment agreement in place.

What to do?

Taxpayers that are seriously behind on their taxes ought to pay what they owe or enter into a payment agreement with the IRS to avoid putting their U.S. passports in jeopardy.  If you are a Taxpayer that is behind on your tax obligations, you ought to come forward and pay what you owe or enter into a payment plan with the IRS. Consult your specialized tax advisor to establish a payment plan with IRS.   ©