Are Tax Debt Problems Keeping You Awake?
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The Internal Revenue Service has reiterated its warning that taxpayers may not be able to renew a current passport or obtain a new passport if they owe federal taxes. To avoid delays in travel plans, taxpayers need to take prompt action to resolve their tax issues.
In January of last year, the IRS began implementing new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act.
The law requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt, which is $52,000 or more. The law also requires the State Department to deny their passport application or renewal. If a taxpayer currently has a valid passport, the State Department may revoke the passport or limit ability to travel outside the United States.
When the IRS certifies a taxpayer to the State Department as owing a seriously delinquent tax debt, they receive a Notice CP508C from the IRS. The notice explains what steps a taxpayer needs to take to resolve the debt.
Please note, the IRS does not send copies of the notice to powers of attorney.
To avoid any disruption of travel plans, the taxpayer should immediately take steps toward resolving the debt. Taxpayers should also be aware that some resolutions take longer than others, such as adjusting a prior tax assessment.
When a taxpayer no longer has a seriously delinquent tax debt because they paid it in full or made another payment arrangement, the IRS will reverse the taxpayer’s certification within thirty days. The State Department will then remove the certification from the taxpayer’s record, so their passport won’t be at risk under this program. The IRS can expedite the decertification notice to the State Department for a taxpayer who resolves their debt, has a pending passport application and has imminent travel plans or lives abroad with an urgent need for a passport.
A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $52,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.
Before denying a passport renewal or new passport application, the State Department will hold the taxpayer’s application for 90 days to allow them to:
There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt, including the following:
Frequently, taxpayers qualify for one of several relief programs including the following:
Subject to change, the IRS also will not certify a taxpayer as owing a seriously delinquent tax debt or will reverse the certification for a taxpayer:
For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department of the delinquency and the taxpayer’s passport is not subject to denial during the time of service in a combat zone.
For more details on this topic, contact your tax professional or visit irs.gov.
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