Why Unpaid Taxes Might Ruin Summer Travel Plans

Published: Mar 2, 2023
Topics: Tax
Share

Tax Controversy & Dispute Resolution Spotlight

U.S. citizens who owe delinquent taxes not only face the risk of enforcement actions such as liens and levies, but they can also be prevented from traveling internationally. This article discusses who the passport restriction applies to, as well as the different options for reversing it.

Under IRC Sec. 7345, added by Congress in 2015 as part of the Fixing America’s Surface Transportation Act, the IRS can issue a certification to the State Department for certain individuals who owe “seriously delinquent tax debt.” Once the IRS issues such a certification (Notice CP508C), the individual will be unable to obtain a passport.

What is “seriously delinquent tax debt?”

Section 7345 defines “seriously delinquent tax debt” as unpaid taxes of $50,000 or more (adjusted annually for inflation, which for 2023 is $59,000 pursuant to Rev. Proc. 2022-38), with respect to which either a Notice of Federal Tax Lien has been filed, or a levy has been issued, and Collection Due Process (CDP) rights have either been exhausted or have lapsed.

What happens after the IRS issues Notice CP508C?

Once the IRS issues a certification of seriously delinquent debt to the State Department, the individual will be denied a new passport. The statute also authorizes the State Department to revoke an existing passport the individual already has. The Service considers several factors in determining whether to make a revocation referral to the State Department. Examples include whether the Service had previously reversed the certification because of the individual’s promise to pay, and they failed to pay, or if the Service believes the individual could use offshore assets or activities to satisfy the liabilities but chooses not to.^[1] Before the IRS asks the State Department to revoke an existing passport, it will issue Letter 6152 asking the individual to call within 30 days to resolve the delinquent balance and prevent the revocation.^[2]

How can a certification of seriously delinquent tax debt be reversed?

Aside from writing a check to the IRS for full payment of the taxes owed, there are several options available for reversing the IRS’s certification to the State Department, including but not limited to the following:

Entering into an installment agreement;
Submitting an Offer in Compromise;
Submitting a request for innocent spouse relief;
An IRS determination that the debt is “currently not collectible;”
Filing for bankruptcy; or
Being located in a federally declared disaster area.^[3]

Plan Ahead

Reversal of the certification is not instantaneous. Once the tax debt has been resolved, the IRS will generally issue a reversal (Notice CP508R) within 30 days and provide notification to the State Department.^[4] This decertification can be expedited if the individual meets the three following conditions:

They are eligible for decertification;
They provide proof of foreign travel scheduled within 45 days; and
They have a pending application for a passport renewal or have had their application denied, and they provide a copy of the letter from the State Department denying their application within the past 90 days.^[5]

Since individuals subject to a Certification of Seriously Delinquent Tax Debt have no administrative appeal rights, it is important to understand the exceptions described above and take action as soon as possible to ensure that any upcoming travel plans are not disrupted.

[1] https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes; see also IRM 5.19.25.11.2.

[2] Id.

[3] https://www.irs.gov/individuals/understanding-your-cp508c-notice

[4] Id.

[5] IRM 5.19.25.10.1.

Our Current Issue Q1 2023: