The IRS has issued a reminder to taxpayers that they are allowed to certify to the US State Department if an individual taxpayer has seriously delinquent tax debt, which could impact obtaining or keeping a US passport. While the IRS has not yet begun certifying tax debt to the State Department, they are slated to begin in early 2017.
The ability for the IRS to issue such a certification was first approved by the Fixing America’s Surface Transportation Act of 2015 (FAST Act), which included several revenue raisers to help offset the cost of highway and transportation spending. The FAST Act prohibits the State Department, upon receiving a certification from the IRS, from issuing a passport except in emergency circumstances or for humanitarian reasons. The FAST Act also requires the State Department to revoke a passport previously issued, but it allows a limited passport for return travel to the US.
What Constitutes “Seriously Delinquent” Tax Debt?
The IRS has stated that seriously delinquent tax debt is an individual’s unpaid, legally enforceable federal tax debt totaling more than $50,000 (indexed for inflation and including penalties and interest) for which a:
- Notice of federal tax lien has been filed and all administrative remedies under Code Sec. 6320 have lapsed or been exhausted; or
- Levy has been issued
Some tax debt, the IRS explained, is not included in determining seriously delinquent tax debt. It includes tax debt:
- Being paid in a timely manner under an installment agreement entered into with the IRS
- Being paid in a timely manner under an offer in compromise accepted by the IRS or a settlement agreement entered into with the U.S. Justice Department
- For which a collection due process hearing is timely requested in connection with a levy to collect the debt
- For which collection has been suspended because a request for innocent spouse relief under Code Sec. 6015 has been made
The State Department’s Process
Before denying a passport, the State Department will hold an applicant’s application for 90 days. During this time, the individual can resolve any erroneous certification issues, make full payment of the tax debt, or enter into a payment alternative, such as an installment agreement, the IRS reported. There is no grace period for resolving the debt before the State Department revokes a passport, the IRS added.
The IRS will notify taxpayers in writing if the agency makes a certification to the State Department. The agency will also notify taxpayers in writing if it reverses a certification. On its website, the agency stated that reversal of certification will be made as soon as practicable if the certification is erroneous. The IRS will provide notice within 30 days of the date the debt is fully satisfied, becomes legally unenforceable or ceases to be seriously delinquent tax debt.
Taxpayers may seek judicial review of certifications. If the Tax Court or a federal district court finds the certification was erroneous, the court may order the IRS to notify the State Department. There is no administrative process before filing suit in court, the IRS explained.
New York State
This may sound familiar to holders of a New York State driver’s license, as NYS has a similar provision that allows for the indefinite suspension of a driver’s license for unpaid NYS tax debts.