Last November, we wrote a blog informing you about a proposed bill that would deny passports to U.S. citizens who have extensive tax debt. On December 4, 2015, President Obama signed that bill into law. It is now Public Law No: 114-94, known as the Fixing America’s Surface Transportation Act or “Fast Act.” It provides much-needed funding for surface transportation infrastructure planning and investment, the first in over 10 years to provide funds to create safer roads and better infrastructure.
Although this bill mostly provides necessary funding for highways and public transportation, hidden in its terms under the Title LII, Subtitle A Tax Provisions is section 52102, which allows the revocation or denial of passports due to excessive tax debt. It states that this bill:
“Authorizes the Department of State to: (1) deny, revoke, or limit a passport to any individual upon receiving certification from Treasury that such individual has a seriously delinquent tax debt in excess of $50,000; and (2) deny the issuance of a passport for which no social security number is provided or for which an incorrect or invalid number is provided.”
With this law, owing tax debt no longer means that just your valuables and assets are at risk of seizure by the government; it can now take away your right to travel by revoking or denying your passport. At Fidelity Tax Relief, we are here to help you resolve your tax debt so that you do not have to worry about this or any other consequence. Call us today at 877-372-2520, and we will investigate your tax debt and find the best way to reduce or remove your debt and get you back on track.
What Does It Mean to Be Seriously Delinquent?
In order to know how the law affects you, you must first understand what it means to be “seriously delinquent” with your federal taxes. The bill explicitly states any taxpayer with debt over $50,000 potentially falls under this category. This amount includes the initial tax liability and any interest and penalties and will be adjusted for inflation in the future. However, as soon as your tax debt goes over the $50,000 mark, you won’t have your passport privileges taken away. You must have already entered collective action, which occurs when the IRS places a tax lien on your property or sends you a final notice of intent to levy.
You do have some time to act before your passport is taken away. The IRS will contact a taxpayer to inform him or her about the certificate and the revoking or denying of the passport similar to any collective action, such as a lien or levy. The IRS always provides 30 days for taxpayers to enter into a settlement agreement, pay off the tax debt, or argue the amount before taking any collective action, and the same will be for taking a person’s passport.
Additionally, you will not face having your passport denied or revoked if the IRS has accepted your Offer In Compromise, you are currently enrolled in an Installment Agreement, or you have been granted any other tax relief settlement. This lasts as long as you do not go against the terms of those settlements, such as missing a payment or not being compliant with your taxes in the future. If you have a Collection Due Process Hearing, then the IRS cannot take action against your passport until after the hearing.
To recap, you only become a “seriously delinquent” taxpayer once you have above $50,000 in debt and have entered collective action with no action on your part, whether to enter a negotiation, appeal the decision, or pay your debt.
What Happens Next?
Once the IRS has determined you are a “seriously delinquent” taxpayer, it will send a certificate to the Secretary of Treasury. Then, the treasury sends it on to the Secretary of State. Upon receipt of this certification, the Secretary of State denies or revokes the passport of the person listed on the certificate. Although the Secretary of State must do this by law, he or she does have the power to grant exceptions in emergency or humanitarian situations. An example would be if a U.S. citizen is in another country during a terrorist attack and needs to return home for his or her safety.
Upon resolution of the tax debt, the IRS has 30 days to send a new certificate that informs the Secretaries that the person should not be labeled as a “seriously delinquent” taxpayer anymore. This will happen whether you pay off the tax debt, enter into an Installment Agreement, have your Offer in Compromise accepted, request for Innocent Spouse Relief or otherwise handle your taxes.
After the new certification has been processed, the Secretary of State deletes the name from the records and the taxpayer will once again have his or her right to travel with the issuance or re-issuance of a passport.
Is the Certificate Binding if the IRS Made the Mistake?
The IRS is not an infallible institution, which means it might make a mistake and send a certificate to the Secretary of Treasury that names a person who does not meet the criteria of “seriously delinquent” or otherwise makes a mistake. If this happens to you, there is a course or action you can take. After successfully going through the channels with the IRS to prove that the debt and/or certification is in error, the agency will send your name to the Secretary of State to be removed just as though you settled the tax debt. Unfortunately, it could take a few months, as it takes some time to prove the error to the IRS and even more time to process the revocation of the certificate with the Secretary of State.
This new law is to be implemented without delay. This means if you already owe $50,000 or more in tax debt, then you might find your passport denied or revoked. Do not hesitate to take action against your tax debt even if you do not yet owe that much money. With the addition of penalties and interest, a tax liability can quickly add up until you do become “seriously delinquent.” Starting a negotiation for tax settlement with the IRS will help to stop any collective action and might also help to prevent any certification heading to the Secretary of State.
At Fidelity Tax Relief, we do not want to see you have to give up your property, assets, or right to travel. We will help you to set up a way to remove or reduce your tax debt and once again become compliant with the IRS. This might be through an Installment Agreement, Offer in Compromise, Penalty Relief, or some other tax relief program. We will help you get your passport back so that you can take those vacations you can now afford once your tax debt issue is handled.