United States: Passport Revocations Under Section 7345
To print this article, all you need to do is be registered or log in to Mondaq.com.
One of the little-known tools in the IRS’ collection tool belt is the ability to revoke a taxpayer’s passport when the taxpayer has a “seriously overdue tax debt.”
Congress passed Section 7345 in 2015. In certain unpaid tax situations, the law authorizes the IRS to certify that debt to the Department of State for action. The Department of State will generally not issue a passport to a taxpayer after receiving such certification from the IRS. The Department of State can deny a taxpayer’s passport application or even revoke a pending passport.
What tax debt is eligible
The IRS certifies “seriously overdue tax debt” to the Department of State. “Seriously Delinquent Tax Debt” is an unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $55,000 (adjusted annually for inflation) for which: (1) a notice federal tax lien has been filed and all administrative and statutory remedies have lapsed or been exhausted; or (2) A direct debit has been issued.
Some tax debts are not included in Severely Delinquent Tax Debts, such as Foreign Bank and Financial Accounts Report (FBAR) penalty and child support. Also not included are tax debts:
- Be paid in a timely manner with an IRS-approved installment agreement;
- Be paid in a timely manner with an Offer in Compromise accepted by the IRS or a settlement agreement reached with the Department of Justice;
- For which a collection due process hearing is requested in a timely manner regarding a levy to collect the debt; and
- For which collection has been suspended because an application for innocent spouse relief has been made.
The IRS will also not certify that a person owes a severely delinquent tax debt:
- Who is bankrupt;
- Who is identified by the IRS as a victim of tax-related identity theft;
- Whose account the IRS has determined is currently not collectible due to hardship;
- Who is in a federally declared disaster area;
- Who has a pending application with the IRS for an installment arrangement;
- Who has a pending Offer in Compromise with the IRS; and
- Who has an adjustment accepted by the IRS that will satisfy the entire debt.
The IRS will defer certification while an individual is serving in a designated combat area or participating in a contingency operation.
How does the process work?
department. The IRS will send a Notice CP508C to the taxpayer at the time the IRS certifies a seriously overdue tax debt to the Department of State. The IRS will send the notice by regular mail to the taxpayer’s last known address. Note that the taxpayer’s attorney will not receive a copy of the notice.
Before denying a passport, the Department of State will hold a taxpayer’s application for 90 days to allow them to:
- Resolve any erroneous certification issues;
- Make full payment of the tax debt; or
- Enter a satisfactory payment agreement with the IRS.
Cancellation of certification. The IRS will issue a CP508R notice when it revokes the certification. The IRS will revoke a certification when:
- The tax liability is fully satisfied or becomes legally unenforceable;
- The tax debt is no longer seriously overdue; or
- The certification is wrong.
The IRS will proceed with this cancellation within 30 days and notify the Department of State as soon as possible. The IRS will not revoke certification if a request for a collection hearing or an innocent spouse waiver relates to a debt that is not certified. Also, the IRS will not revoke the certification just because the taxpayer pays the debt below the threshold.
Dismissal to revoke the passport. The IRS can ask the Department of State to exercise its power to revoke a passport. For example, the IRS may recommend revocation if the IRS revoked a certification based on a promise to pay, but the taxpayer did not pay. The IRS can also ask the Department of State to revoke a passport if the taxpayer can use offshore activities or interests to settle their debt, but chooses not to. Before the IRS sends a revocation referral to the Department of State, the IRS will send a 6152 letter asking the taxpayer to call the IRS within 30 days to resolve their account to prevent this action.
Judicial review of certification. The Department of State assumes no liability in these matters and cannot be sued for any erroneous notification or failure to decertify under the law. However, if the IRS has certified a debt to the Department of State, the affected taxpayer may bring an action in the United States Tax Court or a United States District Court to have the court determine whether the certification is in error or whether the IRS did not revoke certification when required. If the court determines that the certification is wrong or should be revoked, it can order the IRS to notify the Department of State that the certification was wrong. Note that a restricted subset of Tax Court rules (Rules 350-354) relate specifically to lawsuits regarding passport certifications and should be consulted closely when considering the filing of such a lawsuit. .
However, the law does not give the court the power to release a lien or levy or award damages in a lawsuit to determine whether a certification is in error. No administrative claim or other contact with the IRS is necessary to resolve the miscertification issue before filing a complaint in the US Tax Court or a US District Court.
If you need your U.S. passport to keep your job, or if you have upcoming travel plans, once the IRS certifies your seriously overdue tax debt to the Department of State, you must pay the balance in full or make another payment arrangement to have your certification cancelled. . In certain situations, the IRS may expedite the cancellation of a certification to the Department of State.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
POPULAR ARTICLES ON: United States Tax