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You may be surprised to learn that having an unpaid tax bill with the federal government could potentially hamper your ability to travel or live abroad. Each year hundreds of taxpayers with IRS delinquencies encounter restrictions on their United States Passports preventing them from traveling to and from most international destinations. Sometimes the unsuspecting taxpayer doesn’t realize there is an issue with his passport until he is at the airport!
Are you wondering what kind of outstanding tax liability gets you in trouble with the State Department and how to avoid cumbersome passport restrictions? Keep reading to learn what qualifies as seriously delinquent tax debt and how to protect your passport from getting revoked.
Seriously Delinquent Tax Debt
If the IRS considers your unpaid tax bill as seriously delinquent, you might be prevented from leaving the country. The IRS will certify tax debt as seriously delinquent when the taxpayer owes more than $55,000 (including interest and penalties) and the IRS has already exhausted all means of collection (e.g., filed a tax lien, attempted a levy).
In other words, it’s not enough to just owe the IRS upwards of $55,000. You must also have been in the collection queue for quite some time and should have received several IRS notices informing you of the past due tax and the enforcement action the IRS has taken in an effort to collect from you.
A tax bill can quickly reach the $55,000 threshold given that it includes the underlying tax (either as per your tax return or per an additional assessment) plus interest and penalties which accrue monthly at an alarming rate. If the taxpayer fails to file a return for a year in which he should owe a relatively small amount of tax, the IRS may do their own assessment of what the taxpayer owes (substitute for return) and then assess failure to file and failure to pay penalties plus interest which could land you on the passport revocation list very quickly.
Also of concern is that many kinds of tax debt can be subject to certification as seriously delinquent including income tax, Trust Fund Recovery Penalties (portion of payroll tax assessed against individual owners or responsible persons), business taxes for which the individual is liable, and other civil penalties.
However, there are exceptions. For example, the IRS will not certify you as having seriously delinquent tax debt if you are in bankruptcy, you live in a federally declared disaster area, you are the victim of tax-related identity theft, or you are serving in a combat zone.
Additionally, taxpayers who are challenging an assessment of tax via administrative appeals (e.g., Collection Due Process hearing) or a petition for innocent spouse relief, will be exempt from certification. Most notably, as long as you are in compliance and resolution or pending resolution status with the IRS, you should be able to avoid passport restrictions.
IRS Notice CP508C
If you are one of those taxpayers who ignores certified letters from the IRS, you might miss an important notice about your passport privileges. The IRS will send you a Notice CP 508C at the time it certifies your tax debt as seriously delinquent. When it does so, it sends this information to the State Department.
Before placing restrictions on your passport, the State Department will give you 90 days to resolve erroneous certification issues, make full payment of the debt, or establish a payment arrangement with the IRS.
Once the 90-day period expires, and if the taxpayer has been unsuccessful in avoiding certification, the State Department can revoke passports that were previously issued or refuse to issue a new passport. You will be notified in writing if the State Department your passport application or revokes your current passport.
If the taxpayer is overseas after the IRS has issued the certification, the State Department may issue a limited validity passport good for direct return to the United States so that you can resolve your account.
Reversing Passport Restrictions via Decertification
There are several ways to force a decertification of seriously delinquent tax debt and get passport restrictions lifted, even if you cannot pay the taxes that you owe in full, including:
- Setting up an installment agreement,
- Seeking a settlement via offer in compromise,
- Establishing currently not collectible status,
- Filing a timely request for a Collection Due Process hearing,
- Filing a petition for innocent spouse relief,
- Successfully challenging an erroneous certification.
Typically, you must be in filing compliance (current on the filing of any missing returns) in order to establish a resolution with the IRS. This might incentivize taxpayers to get their missing returns filed and processed as this takes time and could delay decertification efforts.
In certain cases, taxpayers with imminent international travel plans might qualify for expedited decertification which can shorted IRS processing time by 14 to 21 days. You are required to provide proof of international travel within 45 days or proof of residence abroad.
The IRS makes a reversal of certification within 30 days once it establishes that the tax debt is no longer seriously delinquent (decertification), the tax debt is fully satisfied or no longer legally enforceable, or the certification is erroneous. The State Department will then send the taxpayer notice that the passport restrictions have been lift via Notice CP508R.
Do You Need a Tax Attorney?
An accomplished tax attorney is best suited to help you resolve a seriously delinquent tax liability whether via offer in compromise, installment arrangement, or not collectible status. This is especially true when time is of the essence and the ability to freely use your passport is at issue.
You may have grounds to dispute an IRS certification as erroneous or challenge the tax that has been assessed against you via administrative appeals. A skilled tax attorney can help you correct the tax bill and also get your passport restrictions reversed quickly.
On average taxpayers who set up their own payment plans with the IRS end up waiting more than 60 days for their passports to get cleared for travel. Also, any request for expedited decertification must be substantiated with specific documentation and is only granted under exceptional circumstances.
The experienced tax attorneys at Segal, Cohen & Landis have successfully resolved hundreds of decertification cases and have helped clients get IRS passport restrictions lifted in a timely manner while also resolving the underlying tax liability. We have secured expedited decertification on behalf of clients with imminent international travel plans as well.
If you are interested in having a complimentary consultation with one of our partner attorneys regarding your tax matter, please feel free to contact us. We would be happy to speak with you and will advise you how we can resolve your case and how much it would cost.