Many of you will remember the transportation bill signed into law by President Obama. Did you also know that there is a provision in that bill that requires the Internal Revenue Service (IRS) to refer seriously delinquent taxpayers to the US Department of State for denial or revocation of their passport? The United States Surface Transportation Repair Act (FAST Act), PL 114-94, added Sec. 7345, which authorizes the IRS to certify to the Secretary of State that a taxpayer is seriously behind on their taxes. The State Department can then deny, revoke, or limit the taxpayer’s passport.
To qualify as a seriously delinquent taxpayer, the taxpayer must have at least $ 50,000.00 in outstanding tax debt, including interest and penalties. In addition, a lien notice must have been filed and all administrative appeal rights exhausted or expired, or a lien notice must have been filed. It is also required that both the notice alerting to the payment of taxes about the filing of a tax lien and the notice of the intention of the IRS to impose a lien must include information related to Sec. 7345, certification of seriously delinquent tax debt and the denial, revocation or limitation of passports for people with said tax obligation.
The US Department of State also requires the Internal Revenue Service to provide contemporaneous notification to the taxpayer. Once the Department of State receives certification from the Internal Revenue Service (IRS), no passports will be issued and those already issued may be limited or revoked. In certain circumstances, exceptions are made, but these exceptions are generally limited to humanitarian or emergency reasons. If taxpayers are already out of the country, the State Department will limit travel to taxpayers returning to the United States.
Taxpayers who meet the “seriously delinquent taxpayer” criteria may be granted an exception if they meet one of the following conditions:
• They requested relief from the spouse of innocence
• Collection activity has been suspended due to a request for a “due process” hearing.
• They reached an acceptable payment agreement called an Installment Agreement (IA).
Although the Offer in Compromise (OIC) may be an appropriate resolution and is worth pursuing, waiting for the outcome of a submitted offer does not prevent the Department of State from affecting the travel ability of a seriously delinquent taxpayer.
Unfortunately, the only way to reverse the certification once it has been done is to resolve the outstanding debt, either by paying the debt in full, entering into an installment agreement, obtaining innocent spouse relief, or a successful offer in compromise. . Even if you pay the debt under the amount of $ 50,000.00, the certification will remain in effect until the debt has been paid in full. Once the tax liability has been resolved, the IRS must contact the Department of State to withdraw the certification.
Links and notices of intent to tax submitted prior to the previous bill’s effective date (December 4, 2015) must not render the taxpayer certifiable due to the lack of required language in the submitted notices. If you find yourself in the aforementioned situation, here are some things you can do to help. Please note that nothing in this article in any way overrides the advice of a licensed tax professional. The first thing to consider is proper planning. This will help you keep up with your tax obligations and prevent the situation before it gets out of hand. Second, if you cannot pay the balance in full, try to get the balance below the $ 50,000.00 mark before certification takes place. Remember, if your balance is below that amount, you are not at risk of getting certified. It is only after certification that the reduction of the balance has no effect. You can then avoid certification by entering into an installment agreement, requesting compensation for the innocent spouse, requesting a “due process” hearing, and requesting an offer in compromise (OIC).