Most people know that the Internal Revenue Service (IRS) can be very aggressive about collecting past-due taxes. You’re probably aware of the possibility of significant wage garnishments, and the use of tax liens. However, you may not know that if you’re seriously delinquent in your tax obligations, your passport may be at risk.
New Legislation Regarding Passports and Taxes
The Fixing America’s Surface Transportation (FAST) Act took effect in January of this year. The new legislation requires the IRS to notify the Department of State when taxpayers are “seriously delinquent.” Once the State Department receives notification of a serious delinquency, it must deny any application or renewal of the delinquent taxpayer’s passport. Under some circumstances, a valid passport may even be revoked.
What Constitutes “Seriously Delinquent” Tax Debt?
For purposes of the FAST Act, a tax obligation is “seriously delinquent” if:
- The unpaid, legally enforceable federal tax debt exceeds $51,000, including penalties and interest;
- Notice of a federal tax lien has been filed;
- All administrative remedies have been exhausted, or the time for pursuing them has expired; and
- A tax levy has been issued
This provision applies only to tax debt, and does not include other debt that is collected by the IRS, such as child support or Foreign Bank and Financial Accounts (FBAR) penalties.
Exceptions to the Limitation on Passports
There are two types of exceptions to the limitation on issuance or renewal of passports in connection with delinquent tax debt. The first type of exception relates to the status of the debt itself. Delinquent tax debt in excess of $51,000 which fulfills all of the other listed criteria will not trigger the denial or revocation of a passport if:
- The debt is being timely paid through:
- A due process hearing has been requested regarding the levy; or
- Collection has been suspended as the result of a request for innocent spouse relief
The other type of exception applies even though the debt requirements are met and none of the above debt-status issues is applicable. These include:
- When the debtor is in bankruptcy
- When the debtor is identified as a victim of tax-related identity theft
- When the IRS has determined that the debtor’s account is uncollectible due to hardship
- When the debtor is in a federally-declared disaster area
- When the debtor has a pending:
- Request for an installment agreement with the IRS, or
- Offer-in-compromise with the IRS
- When an IRS-accepted adjustment will fully satisfy the debt
Remedies for Taxpayers Ineligible for Passports
Often, ineligibility for a U.S. passport due to delinquent tax debt can be resolved through negotiation of an installment agreement or offer-in-compromise. However, that process can be time-consuming, so the last thing you want is to send off a passport application in advance of a business trip or family vacation, only to get a notice of denial.
If you’re concerned about the possibility that your passport might be subject to denial or revocation based on delinquent tax debt, the experienced professionals at Key Tax Group can help. Contact us today.