Almost every day, tax professionals receive little tidbits of information from the IRS in their e-mail inboxes. In most cases, the advice falls into two categories: something we already preach to our clients (the IRS will never call you!), or advice that is, to speak frankly, useless. But today’s tip of a correlation between tax debt and your vacation struck us as odd, so we spent some time reading all about it…
A Connection Between Heavy Tax Debt and Your Passport
Two items you wouldn’t consider necessarily connected, right? Wrong! Apparently, under the Fixing America’s Surface Transportation (FAST) Act, the IRS notifies the State Department when taxpayers are certified as owing a seriously delinquent tax debt.
What’s a Seriously Delinquent Tax Debt?
The IRS defines this type of tax debt as a simple dollar amount: $52,000 or more. This is the current level, but that limitation will likely creep upward over time.
When this happens, the IRS will certify the taxpayer as owing a seriously delinquent tax debt, and the taxpayer receives Notice CP508C from the Revenue Service. The notice explains what steps the taxpayer needs to take to resolve the debt, and how to get in contact with the IRS. Telephone assistance is available at the IRS to help get the debt resolved quickly.
What’s the Connection from Tax Debt to my Passport?
This is where even our tax professionals went “whoa!” (and they get excited about tax stuff…sheesh.)
The FAST Act, as signed into Law, requires that the State Department deny Passport applications or renewals for anyone with a seriously delinquent tax debt.
Additionally, even if said taxpayer already has a valid Passport that isn’t up for renewal anytime soon, the State Department can still revoke the Passport or limit the taxpayer’s ability to travel outside the United States.
The tax professionals at Boundless see the point behind this Law, of course. If you owe the IRS more than $52,000, you shouldn’t be able to afford to go on a Caribbean Cruise. We also understand the flight risk scenario from the point of view of the IRS – they don’t want you eloping and fleeing from your tax debt!
Rest Assured, None of this Happens Fast
Despite the name of the Act that enforces this regulation, the denial or revocation of your Passport does not happen fast. (The lawmaker that wrote the Act obviously never worked at the IRS!)
Before the IRS even contacts the State Department to revoke or deny someone’s Passport, they send that taxpayer Letter 6152 (Notice of Intent to Request U.S. Department of State Revoke Your Passport) to let them know what the IRS intends to do. This gives said taxpayer another opportunity to resolve their tax debts, within 30 days.
The IRS states that they will “generally not recommend revoking a taxpayer’s Passport if the taxpayer is making a good-faith attempt to resolve their tax debts.”
Additionally, they won’t ever pursue this course of action for taxpayers:
- In bankruptcy
- Who have been victims of identity theft
- Whose tax account is currently not collectible due to financial hardship
- Who is located in a federally-declared disaster area
- Who already has a installment agreement or offer-in-compromise (OIC) pending with the IRS
Ways To Resolve Tax Debt Issues
Obviously your tax debt has to both reach a high monetary level and a high level of delinquency for any revocation or denial of your Passport.
The IRS recommends several ways that taxpayers can avoid having the IRS notify the Department of State of their seriously delinquent tax debt:
- Pay the tax debt in full
- Enter into an approved installment agreement
- Propose an Offer-in-Compromise (OIC) to the IRS and get it accepted
- Propose a settlement agreement with the Department of Justice and get it approved
- Schedule a collection due process appeal with a levy
- Have a collection suspended due to a taxpayer’s innocent spouse claim for relief
Here’s the Best Part!
Boundless can help! If you find yourself in tax debt of any amount for any length of time, contact us. We have IRS-licensed Enrolled Agents on staff who can work with you to try to minimize the impact of your debt. We’ll work with you and the IRS to get your case handled right the first time. (We’ve even helped people knock some serious dollars off their debt!)