Posted in: Blog, Posted On: 02-02-2017, Posted By: stevenadmin

Congress recently passed the Fixing America’s Surface Transportation Act (“FAST”).  Included in the FAST Act is Section 7345 of the Internal Revenue Code, which requires the IRS to provide information to the U.S. State Department about people who owe $50,000 or more in tax debt. Based on the information provided by the IRS, the State Department can deny, revoke or limit the ability of these individuals to use their passports.

Here is what you need to know.

1. What is the new passport-restriction program (IRC Section 7345)?

IRC Section 7345 requires the IRS to identify and “certify” individuals who have “seriously delinquent tax debt,” and provide this certification to the State Department. In turn, the State Department can deny, revoke, or limit use of the individuals’ passports until they get into good standing with the IRS.

2. Who is affected?

The passport restriction will affect people who travel internationally and owe $50,000+ in delinquent tax debt, had a lien filed, and all administrative remedies for lien relief have lapsed or been denied; or, a levy issued.

There are exceptions: 1) People who are in an IRS installment agreement to pay their taxes; 2) People who have settled their debt through an offer in compromise or Justice Department agreement; 3) People who appeal a levy through an IRS collection due process hearing; and 4) People who request innocent spouse relief (Form 8857).

3. What will happen to the person who owes seriously delinquent tax debt?

Starting in 2016, the IRS started sending Letter 508C, Notice of certification of your seriously delinquent federal tax debt to the State Department, to the taxpayer’s last-known address to notify the taxpayer that they are certified as owing seriously delinquent tax debt. At that time, the IRS will also send the certification to the State Department.

The State Department then has the authority to deny issuance or renewal of a passport, or fully restrict or limit its use. The State Department will notify the taxpayer in a separate letter about the passport restrictions.

4. How can taxpayers get their passport restrictions lifted?

To get out of the passport restriction, individuals must get back into good standing with the IRS. For most taxpayers, that will mean paying the entire tax bill or, more likely, setting up an installment agreement with the IRS.

5. Can taxpayers just pay the balance to under $50,000 to remove the certification and passport restrictions?

NO!  Individuals certified as having seriously delinquent tax debt must either pay the entire balance or set up a payment agreement with the IRS.

6. Can taxpayers appeal their seriously delinquent tax debt certification?

Under Section 7345(e), taxpayers can appeal their status in federal district court or U.S. Tax Court. But the taxpayers’ passports will remain restricted while they appeal.

Next steps for taxpayers affected by passport restrictions

Owing taxes without being in an arrangement with the IRS to pay them has bad consequences for any taxpayer. Taxpayers who want to avoid or remove passport restrictions should contact a tax professional or call the IRS at (855) 519-4965 to set up an agreement on their balances right away.

Buttonow, Jim. “Then Things you need to know about passport restrictions on delinquent taxpayers.”, Accounting Today Jan. 2016.

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