IRS set to enforce passport denials for tax delinquents

The Internal Revenue Service is warning taxpayers who owe more than $51,000 in tax debts they could have their passport applications or renewals denied unless they pay up.

Starting this month, the IRS will start implementing new procedures required under a 2015 law to crack down on individuals with “seriously delinquent tax debts.” The Fixing America’s Surface Transportation (FAST) Act, which was signed into law in December 2015, requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. “Seriously delinquent tax debt” is an individual's unpaid, legally enforceable federal tax debt totaling more than $51,000 (including interest and penalties) for which a notice of federal tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted or a levy has been issued.

The IRS issued Notice 2018-1, which provides guidance for implementation of the new IRC 7345, added by Section 32101 of the FAST Act. Upon receipt of section 7345 certification, the State Department is generally required to deny a passport application for individuals with seriously delinquent tax debts and may also revoke or limit passports previously issued to those individuals. The notice also describes some exceptions to certification and taxpayer remedies. The FAST Act also requires the State Department to deny the passport application or deny renewal of their passport. In some cases, the State Department may revoke the passport.

Andrew Harrer/Bloomberg

There are several ways taxpayers can avoid having the IRS notify the State Department of their tax debts. They include:

• 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.

A passport won’t be at risk for a taxpayer:

• 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,

• Who has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers who are serving in a combat zone and owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport isn’t subject to denial during this time.

The IRS is advising taxpayers who have fallen behind on their tax obligations to come forward and pay what they owe or arrange a payment plan with the IRS. Taxpayers can often qualify for a relief program:

• Taxpayers can ask for a payment agreement with the IRS by filing Form 9465. They can download the form from IRS.gov and mail it with a tax return, bill or notice. Some taxpayers can enter into an online payment agreement to set up a monthly payment plan for up to 72 months.

• Some financially distressed taxpayers can also qualify for an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS examines the taxpayer’s income and assets to weigh the taxpayer’s ability to pay. To help figure out eligibility, use the online Offer in Compromise Pre-Qualifier.

IRS.gov has some other advice for taxpayers to catch up on their filing and tax obligations and more information about the revocation or denial of passports because of unpaid taxes.