Many people don’t realize that they could lose their passports if they are found to be seriously delinquent in their tax liabilities. This is a relatively new penalty for nonpayment that was created under the 2015 Fixing America’s Surface Transportation Act (FAST Act). The Act requires the IRS to certify seriously delinquent debts to the State Department, which will then pull the taxpayer’s passport.
What do they mean by “seriously delinquent”? The FAST Act defines that as “an unpaid, legally enforceable federal tax liability” of more than a certain amount, which is adjusted annually for inflation and cost-of-living increases. The threshold amount for 2019 is $52,000 and includes back taxes, penalties and interest.
You can avoid having your debts certified to the State Department by:
- Entering into an acceptable settlement with the IRS, such as an installment agreement or offer in compromise
- Timely requesting a collection due process hearing in connection with an innocent spouse claim or tax levy
That said, if you enter into an agreement and fail to pay as promised, or if the IRS determines that you could pay your debt with offshore assets but refuse to do so, the IRS can recertify your delinquency to the State Department for revocation of your passport.
Watch out for these two notices from the IRS
If you have been deemed a seriously delinquent taxpayer and don’t meet the two exceptions above, the IRS will send you Notice CP508C, which gives you information about how to settle your debt. Next, it will send you Letter 6152, Notice of Intent to Request U.S. Department of State Revoke Your Passport, which gives you another change to arrange for payment.
You have 30 days from the date of Letter 6152 to contact the IRS and make a good-faith attempt to resolve the situation.
Sit down with your tax attorney
If you owe a substantial amount in back taxes, penalties and interest, there may be options for reducing the amount you owe. Affordable payment plans can be arranged that can keep you out of collections and prevent the loss of your passport. If your passport has already been denied or revoked, a tax attorney can help you get it back after arranging for appropriate repayment or proving that the alleged debt is not owed.
Anyone who owes delinquent tax debt should discuss settlement options with a tax lawyer.