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Tax Tip of the Week | No. 446 | Past Due Taxes May Jeopardize Your Passport February 7, 2018

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Tax Tip of the Week | Feb 7, 2018 | No. 446 | Past Due Taxes May Jeopardize Your Passport

The IRS has recently provided further details about delinquent tax debts and their impact on your ability to travel. The IRS is required by law to notify the State Department once your tax debt is deemed as “seriously delinquent.” At that point, the State Department will typically deny issuing or renewing a passport and may even revoke an existing passport. Even though this law was enacted back in 2015, the IRS and State Department are only now enforcing the rules.

Please note these rules are not limited to criminal tax cases or even where the IRS believes you are trying to avoid paying a tax debt. Upon notification from the IRS, the State Department typically will not issue or renew your passport. This applies only to a “seriously delinquent” tax debt or more than $50,000. However, remember this tax debt balance also includes penalties and interest both of which may grow at an alarming pace.

The IRS now has new details explaining some remedies should this situation arise. The IRS says that once taxpayers are notified that “certification” of their seriously delinquent tax debt has been transmitted to the State Department, they should consider: (1) paying the taxes in full; (2) entering into an installment agreement with the IRS; or (3) making an offer in compromise. This “certification” is not to be taken lightly. It is not something to be ignored, hoping it will resolve itself. Hope is not a plan. If a “certified” taxpayer applies for a passport, the State Department, in general, will provide the applicant with 90 days to resolve the tax delinquency before denying the passport application. If a taxpayer needs their passport sooner than the 90 day window to travel, the taxpayer must contact the IRS and resolve the issue within 45 days from the application date. This is necessary, so the IRS has enough time to notify the State Department.

Typically, the only avenue for a taxpayer who believes that a certification was wrongfully issued or not reversed because of an error (e.g. the tax debt is paid or ceases to be defined as seriously delinquent) is to file a civil action in court. Going to IRS Appeals, to challenge the certification or the IRS decision not to reverse a certification, is not an option. However, the taxpayer may contact the IRS using the phone number in the IRS Notice CP508C to ask for a reversal of the certification if the taxpayer believes that the certification was issued in error.

As always with the IRS, procedure is important. Before a tax debt reaches this stage, the IRS usually sends multiple notices. Do not ignore, you should respond by their deadline and be persistent. A tax debt does not become final if you keep your tax dispute going.

Note: Further information exists on the IRS website.

Credit for information is given to Robert W. Wood, Contributor to Forbes

We enjoy your questions, comments and suggestions for future topics. You may contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

This week’s author – Mark Bradstreet, CPA

–until next week.

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