The IRS Adds Passport Revocation To Its Collections Arsenal

On January 16, 2018, the Internal Revenue Service (IRS) issued a press release emphasizing that taxpayers who are behind on their taxes should pay what they owe or enter into an Installment Agreement. This warning was issued because the IRS intends to implement new procedures that will put the passports of delinquent taxpayers at risk.

The new procedures were promulgated pursuant to the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. The FAST Act also requires the State Department to deny the passport applications or renewals for those same taxpayers. In some cases, the State Department may revoke their passport.

A taxpayer is considered to have a seriously delinquent tax debt if they owe the IRS more than $51,000 in back taxes, penalties, and interest, for which the IRS has filed a Notice of Federal Tax Lien, and the period to challenge the underlying taxes has expired or the IRS has issued a levy.

There are several actions that these taxpayers can take to avoid having the IRS notify the State Department of their seriously delinquent tax debt. Those actions include the following:

1. Pay the tax debt in full.
2. Pay the tax debt timely pursuant to an approved Installment Agreement.
3. Pay the tax debt timely pursuant to an accepted Offer in Compromise.
4. Pay the tax debt timely pursuant to the terms of a settlement agreement with the Department of Justice.
5. Request or have a pending Collection Due Process Hearing relating to a levy.
6. Have collection action suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

It is also important to note that a passport will not be at risk for any taxpayer who:

1. Is currently in bankruptcy.
2. Is identified by the IRS as a victim of tax-related identity theft.
3. Has had their account with the IRS reviewed and determined to be currently not collectible due to hardship.
4. Is located within a federally declared disaster area.
5. Has a pending Installment Agreement Request with the IRS.
6. Has a pending Offer in Compromise with the IRS.
7. Has an IRS accepted adjustment that will satisfy the debt in full.

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS will postpone notifying the State Department and the individual’s passport is not subject to denial during this time.

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 obligations. Those alternatives are detailed in a number of our blog entries: here, here, here, and here.

Ultimately, this a new tool for the IRS. Because it is new, there are sure to be some issues in how it is implemented. This only increases the importance of capitalizing on the above-detailed alternatives.[/vc_column_text][/vc_column][/vc_row]