The headlines typically discuss IRS revocation of passports, creating fear among those who owe money to the IRS. Many owing significant tax debts fear that they won’t be able to return to the U.S. if their passport is revoked during their trip. As with most headlines, understanding the program results in less fear.
In February 2018, Congress authorized the IRS to begin certifying U.S. passports for revocation. In this process, the IRS identifies “seriously delinquent” taxpayers. The IRS provides notice to the taxpayer and 30 days to respond. If the taxpayer either ignores or provides an insufficient response, the IRS provides certification to the State Department. As of August 2018, the IRS began revocation actions in at least 260,000 cases.
The State Department may then revoke the taxpayer’s current passport. If, however, the taxpayer is outside of the U.S., the State Department may issue a limited validity passport good for a return to the U.S.
The initial question for taxpayers owing money to the IRS is, “Am I a seriously delinquent taxpayer?” The bad news is the IRS’s dollar threshold for seriously delinquent debt is low – an outstanding bill of $51,000 qualifies a taxpayer as seriously delinquent. This amount includes outstanding taxes, penalties, and interest.
The good news comes from the other requirements to be considered seriously delinquent. The taxpayer must have already received either a Notice of Federal Tax Lien or a Notice of Intent to Levy. Taxpayers receiving either Notice are entitled to a Collection Due Process hearing to negotiate a resolution of this debt.
Should a taxpayer fail to reach a resolution at this stage, other options exist to avoid being seriously delinquent. If a taxpayer can reach an agreement to pay the debt via an installment agreement or offer in compromise, even if the taxpayer owes significantly more than $51,000, he or she is not seriously delinquent. Additionally, if a Collection Due Process hearing or innocent spouse request is pending, or the taxpayer is in bankruptcy, the taxpayer avoids being seriously delinquent.
Finally, even if the IRS certifies a taxpayer as seriously delinquent, the State Department holds the IRS’s certification application for 90 days to permit the resolution of the tax debt.
Even if a taxpayer fails to resolve the delinquent tax issue, judicial rights regarding a passport revocation are available in the U.S. Tax Court. The most important thing to do is to take action. Many of the rights to contest or resolve the tax debt contain short timelines to preserve your rights.