Denial of Passport by IRS: How it works

One way in which the IRS can punish you for not paying off your back tax debt is by denying a passport that allows you to travel or leave the US. Passport revocation and travel denial is a tool used by the IRS to aid in the collection of back tax debt and to keep such individuals in the country for enforcement actions such as levies and liens. However, this method does have definite restrictions in its use.

How it Works

Under Code 7345, it permits the IRS to notify the State Department that you possess a serious back tax debt and in turn they will reject any application for a passport and perhaps revoke your current passport, although that may not happen.

If the State Department revokes your passport while you are overseas, then you may be issued a limited validity passport which is only good for the direct return to the US. Have it in mind that the IRS will only take the steps to inform the State Department of your tax debt under certain conditions.

Seriously Delinquent Tax Debt

This is back tax debt that falls under Title 26 of the US Code, which is somewhat limited in nature. So as to have your tax debt qualify as being seriously delinquent in nature, which will invoke a passport application denial and revocation, the following circumstances must apply;

·  Tax Debt Exceeding $51,000

·  Notice of Federal Tax Lien on Property

·  Exhaustion of all Administrative Remedies under Code 6320 to Collect Debt

·  Issuance of Levy on wages, bank accounts and other assets

This means that your tax debt must go beyond $51,000, which does include interest and penalties. It is possible through negotiation to have penalties and interest reduced which may reduce the amount to below $51,000, but you must make an agreement to pay it off. Plus, you must have been notified of a tax lien placed against your property and all efforts by the IRS to collect the debt through this method have been exhausted.

At that point, you will need to have been provided with a final notification of a tax levy, which is the seizure of your property to pay off the debt. At that point, the IRS will notify the State Department to limit your travel because of your seriously delinquent status in terms of your tax debt.

Inflation Adjustment

The current $51,000 limit is indexed, which means that it is adjusted for inflation. Every calendar year, the limit is re-examined based on Code Section 7345 and may be increased by the rise of inflation and cost of living adjustment. The amount is always approximated to the nearest thousand, so the next rise in the limit will be at least to $52,000.

90 Day Delay

Once the State Department has been notified, there is a 90-day delay in denying you a passport for travel which allows the time for you to do the following;

·  Pay Off the Tax Debt

·  Enter a Pay Agreement with the IRS

·  Resolve All Issues with Certification

This means that if your back tax debt falls under one of the exceptions, then your passport application will not be rejected, revoked or denied if the IRS agrees.

Exceptions

There are certain exceptions to the tax debt that does not qualify as being seriously delinquent. This includes the following conditions;

·  FBAR Penalty and Child Support

·  Timely Payments under IRS Approved Installment Agreement

·  CDP Due Process Hearing is Still in Place on Levy to Collect Debt

·  Timely Payments under Offer in Compromise with IRS or Justice Department

·  Innocent Spouse Relief Suspension under Code 6015

For those who fall under one or more of these conditions, then you will not be considered seriously delinquent and your travel passport is safe. There are also conditions which do not trigger a notification by the IRS to the State Department such as the following;

·  Being Bankrupt

·  Victim of Identity Theft that is Tax-Related

·  Hardship Clause

·  Pending Request for IRS Installment Agreement

·  Pending Offer of Compromise with IRS

·  Located in Federal Disaster Area

In addition, individuals who have an approved adjustment with the IRS that will satisfy the debt will not have their travel passports rejected or subject to revocation. Also, individuals who are serving in a contingency operation or designated combat zone will not be subject to State Department notification until they are no longer in such locations.

Reversing Certification

Once the person with the tax debt is certified by the IRS as being seriously delinquent, it can be reversed if certain qualifications are met.

·  The Certification is found to be Not True

·  The Tax Debt is Paid Off or Becomes Unenforceable

·  The Tax Debt Drops below the Standards of Being Seriously Delinquent

Such a reversal will cause the IRS to notify the State Department as soon as practical. This means that the certification is no longer in effect. Such a notification will be sent out when the IRS accepts an offer of compromise that removes the debt or agrees to an installment plan. Also, if the Justice Department agrees to a settlement which resolves the debt or the collection is suspended the certification will be reversed.

The same is true if you make a request in a timely manner for a due process hearing about any levy that has been imposed on you by the IRS. However, there are times in which the IRS will not reverse certification, which includes paying the debt below $51,000, provided other agreements have been made. Also, for debts that are not part of the certification, calling for innocent spouse relief or a due process hearing on those matters will not have any impact.

Once your passport is denied, cancelled or revoked, you must pay full payment or an arrangement with the IRS if you want to get your passport back. The first step is to contact the IRS and make the proper arrangements, so that your passport will be reinstated. Always remember that it may take up to 30 days from the time the tax debt is resolved to when notification is delivered to the State Department for reversal of certification.