Understanding IRS Notice of Passport Action for Seriously Delinquent Debt

Introduction

The IRS Notice of Passport Action for Seriously Delinquent Debt can be a wake-up call for taxpayers. It is part of an enforcement action under the Fixing America’s Surface Transportation (FAST) Act. Let's delve into the intricacies of this notice, its implications, and how you can address it.

What is a Notice of Passport Action for Seriously Delinquent Debt?

The FAST Act, enacted in December 2015, requires the IRS to notify the State Department of individuals classified as having 'seriously delinquent tax debt.' The State Department may then deny, revoke, or limit the issuance of a passport. According to IRC § 7345, a seriously delinquent tax debt is an unpaid, legally enforceable federal tax liability of more than $54,000, inclusive of interest and penalties. This threshold is indexed for inflation.

How is Seriously Delinquent Tax Debt Defined?

A delinquent tax debt is classified as serious if a Notice of Federal Tax Lien has been filed, and the taxpayer's right to a hearing under IRC § 6320 has been exhausted or lapsed, or if a levy has been issued under IRC § 6331.

Exclusions and Exceptions

Not all tax debts result in passport certification. Exceptions include debts that are:

• Paid in full.
• Being timely paid under an installment agreement (IRC § 6159).
• Subject to an Offer in Compromise accepted by the IRS (IRC § 7122).
• Subject to a settlement agreement with the Justice Department.
• Under a collection due process hearing.
• Suspended because of a request for innocent spouse relief (IRC § 6015).

Receiving the Notice

If you're certified as having a seriously delinquent tax debt, you’ll receive IRS Notice CP508C. This notice details the tax periods and the amount you owe. Concurrently, the IRS notifies the State Department, which may then refuse to issue or renew your passport.

Immediate Actions to Consider

Receiving Notice CP508C demands prompt attention. Here are steps you should consider:

• Review the Notice: Verify the accuracy of the stated debt and tax periods.
• Contact a Tax Professional: An enrolled agent, CPA, or tax attorney can provide guidance tailored to your situation.
• Resolve the Debt: Pay the full amount, set up a payment plan, or explore an Offer in Compromise.
• Request for Reversal: If the certification was erroneous, file IRS Form 911 to request taxpayer advocate assistance.

Resolving the Certification

To remove the certification, taxpayers can:

• Pay the Debt: Once paid, the IRS will generally reverse the certification within 30 days.
• Arrange Installments: Set up a payment plan under IRC § 6159.
• Offer in Compromise: If accepted under IRC § 7122, this resolves the debt at a negotiated amount.
• Litigation: In rare cases, you may challenge the certification in court under IRC § 7345(e).

Impact on Your Passport

The State Department's action on your passport may include:

• Denial: New passport applications may be denied.
• Revocation: Existing passports might be revoked.
• Restrictive Actions: Limitations on travel may be imposed.

It is crucial to act quickly to prevent or reverse these actions.

Conclusion

The Notice of Passport Action for Seriously Delinquent Debt is a significant enforcement mechanism. Addressing this issue promptly by resolving the tax debt or arranging a payment plan can prevent major disruptions to your travel plans. Consult a tax professional for assistance.

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