The Internal Revenue Service is warning taxpayers they risk losing their passports if “significant” tax debt is not paid. Those taxpayers are urged to contact the IRS immediately or have travel plans delayed later.
The passport action is mandated by the Fixing America’s Surface Transportation Act (also known as the FAST Act). The IRS is directed to notify the State Department which taxpayers owe a seriously delinquent tax debt of $52,000 or more. The law mandates that the State Department deny those taxpayers passport renewal or application for a new passport.
If a taxpayer currently has a valid passport, State may revoke the passport or limit a taxpayer’s ability to travel outside the United States.
Taxpayers who are certified as owing a seriously delinquent tax debt receive a Notice CP508C from the IRS that explains the steps needed to resolve the debt. IRS telephone assistors can help taxpayers with the options, such as setting up a payment plan or other measures.
The IRS says the important thing for taxpayers to remember is not to delay, since some resolutions take longer to set up than others.
No Time to Waste
Taxpayers with travel plans who have had their passport applications denied by the State Department need to call the IRS as soon as possible to resolve their tax issue and reverse the passport certification.
When expedited, the IRS can generally shorten processing time by 14 to 21 days from the normal 30 days. To qualify for expedited processing, taxpayers must inform the IRS they have travel scheduled within 45 days, or that they live abroad.
For expedited treatment, taxpayers must provide the following documents to the IRS:
- Proof of travel. This can be a flight itinerary, hotel reservation, cruise ticket, international car insurance or other document showing location and approximate date of travel or time-sensitive need for a passport.
- Copy of letter from State denying their passport application or revoking their passport. State has sole authority to issue, limit, deny or revoke a passport.
The FAST Act also allows the State Department to revoke a taxpayer’s passport at the request of the IRS. For example, the IRS may recommend revocation if the IRS had reversed a taxpayer’s certification because of their promise to pay, and they failed to pay. The IRS may also ask State to revoke a passport if the taxpayer could use offshore activities or interests to resolve their debt but chooses not to.
In cases of revocation, the IRS will send Letter 6152, Notice of Intent to Request U.S. Department of State Revoke Your Passport, to the taxpayer to let them know what the IRS intends to do and to give them another opportunity to resolve their debts.
Options for Resolution
There are several ways taxpayers can avoid having the IRS notify State of their seriously delinquent tax debt. They include:
- 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 a pending collection due process appeal with a levy, or
- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
Many times, taxpayers qualify for one of several relief programs to settle tax debts. One option is a payment plan, which can be requested by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Taxpayers who are eligible can use the Online Payment Agreement system to set up a monthly payment agreement. Using the Online Payment Agreement system is cheaper and can save time.
In some cases, an offer in compromise can set up an agreement between the taxpayer and the IRS that settles the tax liability for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. Taxpayers can use the Offer in Compromise Pre-Qualifier tool to help them determine whether they’re eligible for an offer in compromise.
Who Gets a Pass?
The IRS also will not certify a taxpayer as owing a seriously delinquent tax debt or will reverse the certification for a taxpayer:
- Who’s in bankruptcy,
- Who’s identified by the IRS as a victim of tax-related identity theft,
- Whose account the IRS has determined is currently not collectible due to hardship,
- Who’s located within a federally declared disaster area,
- Who has a request pending with the IRS for an installment agreement,
- Who has a pending offer in compromise with the IRS, or
- Who has an IRS accepted adjustment that will satisfy the debt in full.
It should be noted that the IRS cautions the above list is “subject to change.”
For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department of the delinquency and the taxpayer’s passport is not subject to denial during the time of service in a combat zone.
For more on denying, revoking passports because of tax debt visit IRS.gov.