October 16, 2019
To help support fairness and integrity in the tax system, the Internal Revenue Service has made a change in how it handles passport certifications for people with significant tax debt. The Fixing America's Surface Transportation (FAST) Act, signed into law in December 2015, requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. For further information, see Notice 2018-1 regarding implementation of IRC 7345. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their 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. So far, the program has resulted in $1.2 billion in tax payments from taxpayers who the IRS certified to the State Department as being seriously delinquent in their tax debt.
In July, following a request from the Taxpayer Advocate Service (TAS) for a review of the certification procedures, the IRS temporarily suspended passport certification procedures on passports for anyone who had a case open with TAS. Excluding cases from certification solely on the basis that the taxpayer is seeking assistance from TAS could allow a "won't pay" taxpayer to circumvent the intent of the legislation to obtain or renew a passport. Following the review of relevant considerations regarding these procedures, the IRS has determined that a blanket, systemic exception for anyone with an open TAS case is overly broad and could undermine the effectiveness of the statute enacted by Congress in the FAST Act to collect a seriously delinquent tax debt.
Taxpayers have multiple options available to avoid certification by complying with the law or requesting an exclusion from being certified to the State Department as owing a seriously delinquent tax debt. A list of various exceptions available that would allow a taxpayer with tax debt to still be able to obtain a passport is set forth below.
When the IRS certifies to the State Department that a taxpayer owes a seriously delinquent tax debt, currently $52,000 or more, it means the taxpayer can't obtain or renew a passport with the State Department. At any time prior to such a certification, an eligible taxpayer can obtain or renew a passport with the State Department.
Before being certified, taxpayers have multiple opportunities and a lengthy period of time (a minimum 32 weeks, but often up to a year) to work with the IRS regarding a good faith payment plan, to document they can't pay the amount at issue and need to enter into some other financial arrangement regarding the underlying tax debt or for some other non-financial arrangement to resolve the tax debt. On average, taxpayer cases certified to the State Department have been delinquent for 6.9 years. The State Department will allow an additional 90 days for a certified taxpayer to achieve some type of resolution of the tax debt with the IRS before denying the passport application. For example, a taxpayer can submit an installment agreement or information on a financial hardship during those 90 days and still have time for the IRS to remove them from the seriously delinquent list for passport purposes.
For taxpayers in emergency situations, the IRS also has an expedited process to reverse certifications to the State Department within a week. Taxpayers with a seriously delinquent tax debt should timely respond to notices and should not ignore correspondence received from the IRS.
Assistance from TAS
Throughout, taxpayers may still seek assistance from TAS (contact information for TAS is available online, including a listing of local TAS offices) if they believe that they qualify for a statutory or discretionary exclusion to keep them from being certified with the State Department as having a seriously delinquent tax debt.
The IRS will continue to fairly and impartially oversee the certification process with the State Department to uphold the law while also respecting the rights of all taxpayers.
Additional information: Passports and taxpayers who need additional help
Generally, the IRS will not recommend revoking a taxpayer's passport if the taxpayer is making a good-faith attempt to resolve their tax debts.
Certification to the State Department does not occur without the IRS having issued multiple notices to the taxpayer over a lengthy period of time (a minimum 32 weeks). These notices should not be ignored – taxpayers receiving any such notice should contact the IRS at the phone number set forth in the notice, online or by visiting a local Taxpayer Assistance Center (TAC) – a listing of TACs is available at IRS.gov.
Relief programs for unpaid taxes
Frequently, taxpayers qualify for one of several relief programs including the following:
- Payment agreement. Taxpayers can ask for a payment plan with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Taxpayers who are eligible can use the Online Payment Agreement system to set up a monthly payment agreement. Using the Online Payment Agreement system is cheaper and can save time.
- Offer-in-compromise. Some taxpayers may qualify for an offer-in-compromise (based on doubt as to collectability, effective administration or financial hardship, or doubt as to liability), an agreement between a taxpayer and the IRS that settles the tax liability for less than the full amount owed. Taxpayers can use the Offer-in-Compromise Pre-Qualifier tool to help them determine whether they're eligible for an offer-in- compromise.
Generally, the IRS also will not certify a taxpayer as owing a seriously delinquent tax debt to the State Department or will reverse a certification for a taxpayer:
- Who is in bankruptcy,
- Who is identified by the IRS as a victim of tax-related identity theft,
- Whose account the IRS has determined is currently not collectible due to hardship,
- Who is located within a federally declared disaster area,
- Who has a request pending with the IRS for a good faith installment agreement,
- Who has a pending good faith offer-in-compromise with the IRS, or
- Who has an IRS accepted adjustment that will satisfy the debt in full.