The stress of owing taxes to the Internal Revenue Service (IRS) can be overwhelming. Unpaid taxes may result in a lien being placed on your assets, garnishment of one’s wages, or one’s passport being revoked. However, for those with seriously delinquent tax debt, the danger of being unable to travel overseas is potentially not a concern for a short while.
In a memorandum to Taxpayer Advocate Service (TAS) employees, acting National Taxpayer Advocate Bridget Roberts has advised a temporary change related to the revocation of passports for taxpayers having an open case with TAS. According to the memo, effective July 25, 2019, all open TAS cases with a certified taxpayer will be decertified. In addition, new TAS cases will also be systemically decertified. This means that taxpayers with seriously delinquent tax debts will, temporarily, not be in danger of having their passports revoked by the State Department merely because of those seriously delinquent tax debts, so long as those taxpayers are actively working with TAS to resolve their tax matters. A decertification protects the taxpayer’s passport from being denied, limited, or revoked.
IRS code sec. 7345 authorizes—but does not require—the IRS to certify a taxpayer’s seriously delinquent tax debt to the State Department for the purposes of passport denial, limitation, or revocation. A seriously delinquent tax debt is an assessed individual tax liability exceeding $50,000 (adjusted for inflation; presently $52,000) for which either a notice of federal tax lien has been filed or a levy has been made. The IRS must also send a decertification to the Department of State where the certification was in error or where there is no longer a serious delinquent tax debt.
A fun fact in an otherwise awful situation is that IRC 7345(f), which provides for the inflation indexing, states that the dollar amount is to be increased by the cost of living adjustment. In years of deflation the prior year threshold will not go down absent a change to the Code’s language.
Although the decertification of TAS cases is good news, it is only temporary. The TAS will issue new guidance once IRS Commissioner Charles Rettig makes a final decision on this issue.
To avoid negative impacts, those who are unable to fully pay their tax should proactively seek alternative payment arrangements with the IRS. There are also a few exceptions to be aware of. Those going through bankruptcy, have been the victim of identity theft, or have a pending installment agreement with the IRS will not be placed on the “No Passport” list. Taking advantage of this temporary change may be beneficial for those attempting to get a handle on their tax situation.
Seeking help from a tax professionals to stay current and compliant with federal tax compliance obligations will go a long way in avoiding trouble down the road. For questions regarding this issue, please contact Larry Rubin, CPA, Aronson’s tax controversy lead partner, at 301.222.8212.