If your 2018 resolution is to finally take that international vacation that you have been dreaming about, or if you are planning an important business trip next year, then you may want to cut a check to Uncle Sam.
In January 2018, the U.S. government will begin to deny passport applications, and even revoke current passports, if you have a seriously delinquent tax debt.
In 2015, Congress passed the Fixing America’s Surface Transportation (FAST) Act, which requires the State Department to deny your passport application if the IRS certifies you as having a seriously delinquent tax debt. Moreover, if the IRS provides such certification and you already have a valid passport, then the State Department has the authority to revoke your passport.
If you are presently abroad and your passport is revoked, then the State Department may issue you a limited passport that gives you a one time right of return to the United States. Keep in mind, however, that the IRS will be here, eagerly awaiting your return.
The FAST Act, codified as Internal Revenue Code (“IRC”) § 7345, generally defines a seriously delinquent tax debt as an “unpaid, legally enforceable federal tax liability of an individual,” that:
1. has been assessed;
2. is greater than $50,000 (including interest and penalties and adjusted annually for inflation); and
3. with respect to which:
(a) a notice of federal tax lien has been filed and certain administrative rights have been exhausted or lapsed, or
(b) a levy has been issued.
Seriously delinquent tax debt is limited to liabilities under the IRC and does not include other debts collected by the IRS such as penalties associated with the failure to file Foreign Bank Account Reports (FBAR penalties).
If you fit into the above situation, then the IRS has the authority to certify to the State Department that you have a seriously delinquent tax debt.
How to Avoid Passport Issues
Your tax debt is not considered seriously delinquent if:
(a) you are paying your tax debt pursuant to an Installment Agreement;
(b) you are paying your tax debt pursuant to an Offer-in-Compromise that has been accepted by the IRS or a settlement agreement entered into with the Department of Justice;
(c) you have timely requested a Collection Due Process hearing in connection with an IRS levy; or
(d) you have a pending request for innocent spouse relief under IRC § 6015.
Note that simply requesting an Installment Agreement, or applying for an Offer-in-Compromise, does not prevent the IRS from issuing a certification—you must already have an Installment Agreement in place or already have a fully accepted Offer-in-Compromise, to avoid such action.
Once the IRS issues a certification, the State Department may hold your passport application for 90 days in order to allow you time to file an erroneous certification claim, make full payment of the tax liability, or enter into a payment alternative. However, you will not convince the IRS to reverse your certification simply by paying your tax liability below the $50,000 threshold.
How RMG Can Help
If you have a seriously delinquent tax debt, as defined above, then you should meet with a qualified tax attorney as soon as possible before the New Year to avoid being grounded by the IRS.
Giovanni V. Alberotanza is a partner in Rosenberg Martin Greenberg’s nationally recognized tax controversy practice group. Rosenberg Martin Greenberg, LLP is experienced in all aspects of federal and state tax collection matters. Please contact Giovanni at 410.649.4990 or at firstname.lastname@example.org for a free consultation.