In January of 2018, the Internal Revenue Service (IRS) issued a press release advising delinquent taxpayers to negotiate reasonable alternatives to enforced collection action, or risk losing their passport. Please find more on that press release and the IRS’s initial approach to passport revocation here. Suffice to say, the initial process for passport revocation was a bit murky, to say the least.
The IRS’s updated guidance includes a website containing the factors for when passport revocation can occur and how to obtain a passport after the revocation process has begun.
Certification to the State Department for passport revocation occurs when a taxpayer is deemed to have seriously delinquent tax debt. Seriously delinquent tax debt occurs when an individual taxpayer’s unpaid, legally enforceable federal tax debt, including interest and penalties, totals more than $53,000.00 and one of the following steps have occurred:
- 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 against the taxpayer.
The following tax debts are not considered seriously delinquent:
- Report of Foreign Bank and Financial Account (FBAR) penalty and child support.
- Tax debts being paid timely with an IRS-approved Installment Agreement.
- Tax debts being paid timely with an Offer in Compromise accepted by the IRS, or a settlement agreement entered with the Justice Department.
- Tax debt for which a Collection Due Process hearing is timely requested regarding a levy to collect the debts.
- Tax debts for which collection has been suspended because a request for innocent spouse relief has been made.
- Tax debts that are in bankruptcy.
- Taxpayer’s identified by the IRS as a victim of tax-related identity theft.
- Taxpayer’s whose account the IRS has determined is currently not collectible due to hardship.
- Taxpayer’s who are located within a federally declared disaster area.
- Taxpayer who has a request pending with the IRS for an Installment Agreement.
- Taxpayer who has a pending Offer in Compromise with the IRS.
- Taxpayer who has an IRS accepted adjustment that will satisfy the debt in full.
The IRS initiates the certification process by sending the taxpayer a Notice CP508C. It is very important to note that the IRS will not send a copy of the Notice CP508C to any authorized Power of Attorney in the IRS’s system for that particular taxpayer. This just reinforces how important it is for taxpayers and their representatives to communicate regarding IRS notices.
Before denying a taxpayer’s passport, the State Department will hold that taxpayer’s application for 90 days to allow them to:
- Resolve any erroneous certification issues.
- Make full payment of the tax debt.
- Enter a satisfactory payment arrangement with the IRS.
If you are able to persuade the IRS to reverse its certification, the IRS will send the taxpayer a Notice CP508R at the time it reverses certification. That reversal will happen when:
- The tax debt is fully satisfied or becomes legally unenforceable.
- The tax debt is no longer seriously delinquent.
- The certification is erroneous.
The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable. The IRS will not reverse the certification because the taxpayer pays the outstanding debt below the $53,000.00 threshold.
If the IRS certified a taxpayer’s debt to the State Department and that taxpayer cannot reverse that certification, 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 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 made in error.
Finally, if a taxpayer has imminent travel plans, the IRS may be able to expedite the reversal of the certification to the State Department. When expedited, the IRS can generally shorten the 30 days processing time by 14 to 21 days. Though, to achieve the reversal, the taxpayer must inform the IRS that they have travel scheduled within 45 days or that they live abroad. Also, the taxpayer 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 relevant documentation showing location and approximate date of travel or time-sensitive need for a passport.
- Copy of letter from the State Department denying your passport application or revoking your passport. State has sole authority to issue, limit, deny or revoke a passport.
In general, taxpayers who are behind on their tax obligations should consider the variety of alternatives to enforced collection action that could resolve their outstanding tax obligations. They will be the most efficient way to avoid or reverse certification. Those alternatives are detailed in a number of our blog entries: here and here.