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Seriously Delinquent Tax Debt? Don’t Lose Your Passport!

In 2015, the Fixing America’s Surface Transportation Act, Pub. L. No. 114-94 (FAST Act), enacted IRC §7345. This section requires the IRS to interact with the State Department so that taxpayers with “seriously delinquent tax debts” are certified by the IRS as such, and subsequently have their passports revoked or denied by the State Department.

On January 16 of 2018, the IRS issued Notice 2018-01, 2018-3 I.R.B. 299, which provides guidance for the implementation of IRC §7345. The Notice states that implementation will begin this January of 2018.

A “seriously deficient tax debt” is defined as an unpaid, legally enforceable, and assessed federal tax liability exceeding $50,000, and for which: (1) a notice of federal tax lien has been filed under IRC §6323 and the right to an IRC §6320 hearing has been exhausted or lapsed, or (2) a levy has been issued. The $50,000 limit is adjusted for inflation each calendar year beginning after 2016.

The Notice provides that when a certified taxpayer applies for a passport, the State Department, generally, will allow the applicant 90 days to resolve their tax delinquency. Resolution make take the form of one of the following:

  1. Making full payment
  2. Entering into an installment agreement under IRC §6159
  3. IRS acceptance of an offer in compromise under IRC §7122
  4. Making timely payments under the terms of a settlement agreement with the Department of Justice
  5. Requesting or having a pending collection due process appeal with a levy
  6. Having collections suspended under an innocent spouse election
  7. Requesting innocent spouse relief

If a taxpayer needs their passport to travel within those 90 days, the taxpayer must contact the IRS and resolve the matter within 45 days from the date of application.

Notably, there is no “grace period” identified in Notice 2018-1; thus, taxpayers may find themselves subject to these procedures immediately.

While the intent behind these procedures is to improve voluntary compliance, many practitioners have due process concerns since affected taxpayers are not entitled to judicial review until the decision has been made. Please visit Irs.gov for more information. 

If you have delinquent tax debt and concerns with travel restrictions, contact Frost & Associates, LLC today at 410-497-5947.

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