IRS explains revocation of passports of taxpayers with significant debt

With the summer in full swing with taxpayers traveling to foreign destinations, the IRS in IR 2019-1451, 8/8/19  has reminded taxpayers that they may not be able to renew their current passport, or obtain a new passport, if they are delinquent in paying federal taxes.

In 2015 Congress enacted “The Fixing America's Surface Transportation (FAST) Act” and added a new Code section, IRC §7345.  Under IRC §7345, taxpayers having a "seriously delinquent tax debt" is, unless an exception applies, grounds for denial, revocation, or limitation of a passport.

A seriously delinquent tax debt is generally an assessed tax debt that exceeds $50,000 (adjusted for inflation for calendar years beginning after 2016; currently $52,000) and for which a notice of lien has been filed under IRC §6323).  Under IRC §7345(b)(2), a seriously delinquent tax debt does not include a debt for which: there is an agreement in place to repay the debt under IRC §6159 or IRC §7122; or collection is suspended because of a collection due process hearing under IRC §6330 or because innocent spouse relief under IRC §6015(b), (c) or (f) is requested or pending.

In addition, IRC §7508(a)(3) provides that certification of a seriously delinquent tax debt under IRC §7345will be postponed while an individual is serving in an area designated as a combat zone or participating in a contingency operation.

In February 2019, IRS issued IR 2019-23, which provided that when a taxpayer no longer has a seriously delinquent tax debt, because he paid it in full or made another payment arrangement, IRS will reverse the taxpayer's certification within thirty days. It also provided steps taxpayers can take to avoid having IRS notify State and circumstances under which IRS will not issue certifications to State.

The Information Release lists circumstances under which IRS may ask State to exercise its authority to revoke a taxpayer's passport. For example, IRS may recommend revocation if IRS had reversed a taxpayer's certification because of his promise to pay, and he failed to pay. IRS may also ask State to revoke a passport if the taxpayer could use offshore activities or interests to resolve his debt but chooses not to.

Before contacting State about revoking a taxpayer's passport, IRS will send Letter 6152, Notice of Intent to Request U.S. Department of State Revoke Your Passport, to the taxpayer to let him know what IRS intends to do and give him another opportunity to resolve his debts. Taxpayers must call IRS within 30 days from the date of the letter. Generally, IRS will not recommend revoking a taxpayer's passport if the taxpayer is making a good-faith attempt to resolve his tax debts.

The IRS can help taxpayers resolve their tax issues and expedite reversal of their certification to State. When expedited, IRS can generally shorten the 30 days processing time by 14 to 21 days. For expedited reversal of their certification, taxpayers will need to inform IRS that they have travel scheduled within 45 days or that they live abroad.

For expedited treatment, taxpayers must provide the following documents to IRS:

·                 Proof of travel. This can be a flight itinerary, hotel reservation, cruise ticket, international car insurance, or other document showing location and approximate date of travel or time-sensitive need for a passport.

·                 Copy of letter from State denying their passport application or revoking their passport. State has sole authority to issue, limit, deny, or revoke a passport.

The Information Release also repeats the information from IR 2019-23 regarding steps taxpayers can take to avoid having IRS notify State and circumstances under which IRS will not issue certifications to State.