Owe the IRS? Your Passport May Be At Risk if You Don’t Work Out a Payment Plan or OIC with the IRS

Having a “seriously delinquent tax deficiency” as determined under IRC §7345 can enable the IRS to certify an individual’s tax debt to the State Department, which allows the State Department to revoke, deny, or limit an individual’s passport. A taxpayer has “seriously delinquent tax debt” when he or she owes more than $51,000 including late fees and penalties (which is indexed to inflation) and when a levy has been issued or a lien has been filed by the IRS. IRC §7345(b). The right to a Collection Due Process hearing also must have lapsed or have been exhausted in order to be subject to certification.

After receipt of certification, the State Department will not issue a passport and can revoke an issued passport. If a passport is revoked while an individual is traveling overseas, the State Department may allow the individual to use the passport for the limited purpose of returning to the United States.

A taxpayer may avoid certification if he or she has an IRS approved and timely paid installment agreement (IA) or offer-in-compromise (OIC), has an IA or OIC request pending with the IRS, has been placed in Currently-Not-Collectible (CNC) status, has reached a settlement agreement with the Department of Justice, is in bankruptcy, or has made a request for innocent spouse relief. Setting up one of these collection alternatives is the best way to prevent certification and a possible passport denial, revocation, or limitation.

The IRS began sending certifications to State Department as of February 2018. The IRS is required to notify taxpayers in writing when it makes the certification to the State Department. The IRS uses Notice CP 508C to make this notification, so this is definitely an IRS Notice to look out for and act on.

Even if the IRS has already certified your seriously delinquent tax debt to the State Department, you still have the opportunity to act before the State Department will take any action relating to your passport. For instance, before denying a passport, the State Department will hold a passport application for 90 days to allow a taxpayer to resolve an erroneous certification, make full payment of the tax debt, or enter into a payment arrangement with the IRS. Further, the IRS will reverse a certification within 30 days where the debt is satisfied or becomes legally unenforceable, is no longer seriously delinquent, or the certification is erroneous. The statute also gives the opportunity for judicial review of an erroneous certification or failure to reverse a certification.

If you feel you may be at risk of losing your passport due to having a seriously delinquent tax debt, it is imperative to set up a collection alternative to prevent restrictions on your international travel now that the certifications are ongoing.