One of the little-known tools in the IRS collection tool belt is the ability to revoke a taxpayer’s passport where the taxpayer has a “seriously delinquent tax debt.”
Congress passed Section 7345 in 2015. In certain situations of unpaid tax, the statute authorizes the IRS to certify that debt to the State Department for action. The State Department generally will not issue a passport to a taxpayer after receiving such certification from the IRS. The State Department may deny a taxpayer’s passport application or even revoke a current passport.
What Tax Debt Qualifies
The IRS certifies “seriously delinquent tax debt” to the State Department. “Seriously delinquent tax debt” is an individual’s unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $55,000 (adjusted yearly for inflation) for which: (1) A notice of federal tax lien has been filed and all administrative remedies under the law have lapsed or have been exhausted; or (2) A levy has been issued.
Some tax debt isn’t included in seriously delinquent tax debt, such as the Report of Foreign Bank and Financial Account (FBAR) penalty and child support. Also not included are tax debts:
- Being paid timely with an IRS-approved installment agreement;
- Being paid timely with an Offer in Compromise accepted by the IRS or a settlement agreement entered with the Justice Department;
- For which a collection due process hearing is timely requested regarding a levy to collect the debt; and
- For which collection has been suspended because a request for innocent spouse relief has been made.
The IRS will also not certify someone as owing a seriously delinquent tax debt:
- Who is in bankruptcy;
- Who is 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 is 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; and
- Who has an IRS accepted adjustment that will satisfy the debt in full.
The IRS will postpone certification while an individual is serving in a designated combat zone or participating in a contingency operation.
How Does the Process Work?
Certification to the State Department. The IRS will send a Notice CP508C to the taxpayer at the time the IRS certifies seriously delinquent tax debt to the State Department. The IRS will send the notice by regular mail to the taxpayer’s last known address. Note that the taxpayer’s power of attorney will not receive a copy of the notice.
Before denying a passport, the State Department will hold a taxpayer’s application for 90 days to allow them to:
- Resolve any erroneous certification issues;
- Make full payment of the tax debt; or
- Enter a satisfactory payment arrangement with the IRS.
Reversal of certification. The IRS will send a 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. The IRS will not reverse certification if a request for a collection due process hearing or innocent spouse relief is on a debt that’s not certified. Also, the IRS will not reverse the certification simply because the taxpayer pays the debt below the threshold.
Referral to revoke passport. The IRS may ask the State Department to exercise its authority to revoke a passport. For example, the IRS may recommend revocation if the IRS had reversed a certification based on a promise to pay, but then the taxpayer failed to pay. The IRS may also ask the State Department to revoke a passport if the taxpayer could use offshore activities or interests to resolve their debt but choose not to. Before the IRS sends a revocation referral to the State Department, the IRS will send a Letter 6152 asking that the taxpayer call the IRS within 30 days to resolve their account to prevent this action.
Judicial review of certification. The State Department is held harmless in these matters and cannot be sued for any erroneous notification or failed decertification under the law. However, if the IRS certified a debt to the State Department, the affected 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 in error. Note that a narrow subset of Tax Court Rules (Rules 350-354) relates specifically to suits regarding passport certifications and should be consulted closely when considering the filing of such a suit.
The law does not, however, give the court authority to release a lien or levy or award money damages in a suit to determine whether a certification is erroneous. No administrative claim or otherwise contacting the IRS is required to resolve the erroneous certification issue before filing suit in the U.S. Tax Court or a U.S. District Court.
If you need your U.S. passport to keep your job, or if you have imminent travel plans, once the IRS certifies your seriously delinquent tax debt to the State Department, you must fully pay the balance or make an alternative payment arrangement to have your certification reversed. In some situations, the IRS can expedite reversal of a certification to the State Department.
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