Congress passed legislation in January 2018 that defines people who owe more than $50,000 in federal income taxes as “seriously delinquent” and risk losing their passport. This classification triggers a process where the IRS sends out notices to taxpayers who are overdue on payments. If you ignore those notices, the IRS will send letters to the State Department requesting that it block your passport renewal.

The Treasury Inspector General for Tax Administration estimates there are approximately 500,000 Americans who fall into this category. However, many people aren’t aware of this designation because the IRS doesn’t publicize it.

If you believe you fit into this category, you may want to contact a reputable tax attorney at the McGuire Law Firm to help you navigate the paperwork and make sure you don’t miss future deadlines.

A Denver tax attorney drafted this article to discuss issues related to the IRS reporting your seriously delinquent tax debt to the Department of State and, after that having your passport revoked or application rejected.

In January 2018, the Internal Revenue Service announced it would implement new procedures that could impact an individual’s ability to obtain or maintain a passport. The IRS stated these new procedures will affect individuals with “seriously delinquent tax debts.” Under the Fixing America’s Surface Transportation (FAST) Act, the IRS must notify the State Department of certain taxpayers owing seriously delinquent tax debts. The FAST Act also requires the denial of passport applications, renewals of passports, and in some cases, even the revocation of an individual’s passport.

Actions From The IRS

The IRS sends a notice to the State Department when the agency certifies your state tax debt as “seriously delinquent.” This happens when the amount owed exceeds $50,000. If you don’t pay within 30 days, the IRS will certify your debt to the State Department, and the State Department will start sending letters to the people listed on your account.

You must resolve the issue before applying again if you are denied a passport because of a CP508C. To do so, contact the State Department directly. They will hold your application for up to 90 days while you solve the problem. You cannot appeal the decision.

What Is A Seriously Delinquent Tax Debt?

So what constitutes a seriously delinquent tax debt? Generally, the IRS has defined a seriously delinquent tax debt as someone who has a tax debt to the IRS of more than $50,000. The $50,000 threshold would include tax, penalty, and interest for periods whereby the IRS has filed a Notice of Federal Tax Lien or issued a levy. The US taxpayer can no longer appropriately challenge the lien or levy action.

Take Action

If you are a US taxpayer with a seriously delinquent debt to the IRS, you can likely avoid the IRS contacting the State Department by taking the following action(s).

• Pay the debt in full;
• Paying a settlement amount through a tax settlement or offer in compromise with the IRS;
• Paying the tax debt under a formal installment agreement with the IRS;
• Paying the tax debt through a legal settlement with the Department of Justice;
• Suspending collection action by the IRS through an innocent spouse claim; or
• Requesting a Collection Due Process Hearing with a levy.

A taxpayer in the following situations should not be at risk of impacting their passport rights.

• The taxpayer has filed and is in bankruptcy;
• Is an identity theft victim;
• The taxpayer’s account has been determined non-collectible by the IRS;
• The taxpayer is located in a federally declared disaster area;
• The taxpayer has a pending installment agreement with the IRS;
• The taxpayer has a pending offer in compromise with the IRS; or,
• The taxpayer has an adjustment that with satisfy the IRS debt in full.

Settling Your Debt

If you owe money to the IRS, there are many options for settling the debt. Some people choose to pay what they owe over time; others prefer to settle for less. There are three main offers in compromise: installment agreements, offer in compromise, and collection alternative agreements.

An installment agreement allows you to make payments toward your tax debt. You must file Form 9465, Installment Agreement Request, and request an installment agreement. If you qualify, the IRS will send you an offer letter. You can accept or reject the offer. If you accept, you must start making payments within 30 days. An installment agreement cannot exceed six months.

You can also apply for an offer in compromise. This option lets you negotiate directly with the IRS about how much you owe. You may be able to agree to pay less than you owe. To qualify, you must meet specific requirements. For example, you must have no outstanding tax liens against you, pay at least 90% of your tax liabilities for the previous five years, and file all required returns.

Finally, you can consider an alternative collection agreement. With a collection alternative agreement, the IRS agrees to give you a break on your tax debt. In exchange, you must follow specific rules. For example, you may have to pay interest on some of your debts, or you may have to pay a lump sum. You can find out whether you qualify for a collection alternative agreement by filling out Form 433A, Collection Information Statement for Wage Earners and Self-Employed Individuals.

Prevent Future Passport Issues

In short, to prevent any passport issues if you owe taxes to the IRS, if the tax debt is being addressed, your likelihood of having a passport application denied or a passport revoked is severely lessened.

The above article has been prepared by John McGuire of The McGuire Law Firm. Please remember this article is for informational purposes only, and you should consult directly with your tax attorney or business attorney regarding any tax matters or questions. Call us at 720-833-7705.

The IRS has always stated a taxpayer’s rights in Publication 1, which is called “Your Rights as a Taxpayer.  This IRS Publication has now been updated with the ten rights and now the publication will be forwarded to taxpayers when they receive their IRS notices for issues such as tax audits, tax debts and/or IRS collection action.

The IRS commissioner feels that the Taxpayer Bill of Rights “contains fundamental information to help taxpayers” and such a bill of rights has been a goal of Nina Olson of the National Taxpayer Advocate, and was stated as one of Ms. Olson’s top priorities in the Taxpayer Advocate’s most recent report to Congress.

The ten provisions of the Taxpayer Bill of Rights are:

1. The Right to Be Informed

2. The Right to Quality Servive

3. The Right to Pay No More than the Correct Amount of Tax

4. The Right to Challenge the IRS’ Position and Be Heard

5. The Right to Appeal an IRS Decision in an Independent Forum

6. The Right to Finality

7. The Right to Privacy

8. The Right to Confidentiality

9. The Right to Retain Representation

10. The Right to a Fair and Just Tax System

The IRS have planned the timing of updating Publication 1 very well given the peak time for issuing IRS notices and correspondence, especially from 2013 tax returns is now.  Publication 1 will also be stated and available and Spanish and other languages in the near future.

Taxpayers can also read the Taxpayer Bill of Rights on the IRS website, which is www.irs.gov.  A special section will provide the 10 rights.  It is very important for every taxpayer to know and understand their rights, and the IRS website can be a useful tool for many matters.

If you have questions regarding your rights as a taxpayer, a tax attorney at The McGuire Law Firm can assist you with your understanding of such rights, and enforcing these rights before the IRS.  A tax attorney can represent you before the IRS to resolve disputes and other matters.  You can contact The McGuire Law Firm to speak with an attorney today!

You may contact The McGuire Law Firm to schedule a free consultation with a Denver tax attorney to discuss your tax questions, issues and matters, including IRS related problems.  The McGuire Law Firm has law offices in Denver and Golden Colorado.

As an example, say you receive a final notice of intent to levy from the IRS on June 15^th.  The 30 day time period to request a collection due process hearing would expire on July 15^th.  Thus, lets assume you did not request a collection due process hearing by July 15^th, but still need to resolve your IRS issues.  Your option is to contact the IRS agent you are working with, automated collections, request an equivalent hearing or do nothing.  You can request an equivalent hearing by completing Form 12153 and submitting the form to the IRS service center whereby you received the notice that allowed you to request the hearing.  Form 12153 will request your contact information, the periods at issues, the type of hearing you are requesting, why you are requesting the hearing and what collection alternative you feel could be used to resolve the IRS debt.  Requesting an equivalent hearing does not act as an automatic hold on IRS collection action like a collection due process hearing does.  Further, you are not always afforded judicial review rights after requesting an equivalent hearing.  However, the good news is, the collection statute continues to run once you have filed for an equivalent hearing, which it does not with a collection due process hearing, and although the IRS can enforce collection prior to the hearing, as a tax attorney, rarely have I seen the IRS enforce collection leading up to an equivalent hearing.

After filing the equivalent hearing requesting (Form 12153) you will receive a notice from the IRS appeals office that the request has been received.  Thereafter, generally 3-6 months in the future, a hearing date will be called with an IRS appeals officer.  Generally, the IRS appeals officer will request information and such information will be used in analyzing your collection alternative such as an installment agreement or offer in compromise.  For example, if you were an individual, you would likely submit Form 433A, the necessary attachments and your proposal to resolve the issues/debt.

During the hearing you will discuss the collection action taken by the IRS and your proposed resolution.  You may need to provide more documents or information depending upon the circumstances.  Eventually, the appeals officer will make a determination and issue the determination in writing to you.  Hopefully, the determination is the agreement or position you proposed!

You can discuss your tax matters with a Denver tax attorney by contacting The McGuire Law Firm.  The McGuire Law Firm can assist you in resolving IRS debts, audits and disputes as well as other tax questions and issues.  An experienced tax attorney can be very beneficial when dealing with the IRS.  Thus, if you have any question about your matter or issue before the IRS, it is recommended you speak with a tax attorney or tax professional.  Most will offer a free consultation, so what do you have to lose!

Schedule a free consultation with a Denver tax attorney at The McGuire Law Firm! 720-833-7705.