IR 2019-23, 2/27/2019
In an information release, IRS has reminded taxpayers that they may not be able to renew a current passport, or obtain a new passport, if they are delinquent in paying federal taxes. The release also provide clarifications of the relevant rules.
Background. The Fixing America’s Surface Transportation (FAST) Act (P.L. 114-94, 12/4/2015) added a new Code section, Code Sec. 7345. Under Code Sec. 7345, having a “seriously delinquent tax debt” is, unless an exception applies, grounds for denial, revocation, or limitation of a passport, effective Jan. 1, 2016.
Passports are handled by the State Department, not IRS. Code Sec. 7345 effectively authorizes disclosure of certain tax information from IRS to the State Department, which in turn will use this information in making passport-related determinations.
A seriously delinquent tax debt is generally an assessed tax debt that exceeds $50,000 (adjusted for inflation for calendar years beginning after 2016; currently $52,000) and for which a notice of lien has been filed under Code Sec. 6323. (Code Sec. 7345(b)(1), Code Sec. 7345(f)) However, under Code Sec. 7345(b)(2), a seriously delinquent tax debt does not include a debt for which: there is an agreement in place to repay the debt under Code Sec. 6159 or Code Sec. 7122; or collection is suspended because of a collection due process hearing under Code Sec. 6330 or because innocent spouse relief under Code Sec. 6015(b), Code Sec. 6015(c), or Code Sec. 6015(f) is requested or pending.
In addition, Code Sec. 7508(a)(3) provides that certification of a seriously delinquent tax debt under Code Sec. 7345 will be postponed while an individual is serving in an area designated as a combat zone or participating in a contingency operation.
The FAST Act provides procedures for, and restrictions on, IRS’s disclosure of the return information for purposes of passport revocation, as well as procedures for how an individual who was certified by IRS as having a seriously delinquent tax debt gets that certification reversed (i.e., in the case of an error).
In 2018, IRS issued Notice 2018-1, 2018-3 IRB 299, which provided some additional information on procedures pursuant to Code Sec. 7345. See Guidance issued on revocation or denial of passports to delinquent taxpayers.
IRS issues reminder and clarifications. IRS has now issued a reminder about the passport revocation and denial rules and has also added some clarifying information.
When IRS certifies a taxpayer to the State Department as owing a seriously delinquent tax debt, the taxpayer receives a Notice CP508C from IRS. The notice explains what steps a taxpayer needs to take to resolve the debt. IRS doesn’t send copies of the notice to powers of attorney. IRS telephone assistors can help taxpayers resolve the debt; for example, they can help taxpayers set up a payment plan or make them aware of other payment alternatives. IRS advises taxpayers not to delay because some resolutions take longer than others, such as adjusting a prior tax assessment.
When a taxpayer no longer has a seriously delinquent tax debt, because he paid it in full or made another payment arrangement, IRS will reverse the taxpayer’s certification within thirty days. State will then remove the certification from the taxpayer’s record, so his passport won’t be at risk under this program. IRS can expedite the decertification notice to the State Department for a taxpayer who resolves their debt, has a pending passport application and has imminent travel plans or lives abroad with an urgent need for a passport.
Before denying a passport renewal or new passport application, the State Department will hold the taxpayer’s application for 90 days to allow him to:
- Resolve any erroneous certification issues,
- Make full payment of the tax debt, or
- Enter a satisfactory payment arrangement with IRS.
There are several ways taxpayers can avoid having IRS notify the State Department of their seriously delinquent tax debt. They include the following:
- 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 with a levy, or
- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
Subject to change, IRS also will not certify a taxpayer as owing a seriously delinquent tax debt or will reverse the certification for a taxpayer:
- Who is in bankruptcy,
- Who is deceased,
- Who is identified by IRS as a victim of tax-related identity theft,
- Whose account 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 IRS for an installment agreement,
- Who has a pending offer in compromise with IRS, or
- Who has an IRS accepted adjustment that will satisfy the debt in full.
References. For revocation of passport for taxpayer with seriously delinquent tax debt, see FTC 2d/FIN ¶ V-3507; United States Tax Reporter ¶ 73,454.