Passport Revocation and Denial for Seriously Delinquent Tax Debts

In January 2018, the IRS published procedures to begin enforcement of Internal Revenue Code (IRC) section 7345, which requires the State Department to deny the application for, or revoke the passport of, any individual whom the IRS certifies as having a “seriously delinquent tax debt.” IRC section 7345 was enacted on December 5, 2015, as part of the Fixing America’s Surface Transportation Act (FAST Act).

Now that the IRS has procedures in place to enforce IRC section 7345, it is important for CPAs to advise individual clients about this new and very serious consequence to being noncompliant with their tax liabilities.

The key term is “seriously delinquent tax debt,” which is an unpaid, legally enforceable federal tax liability of an individual that—

• has been assessed;
• is greater than $50,000; and
• for which a notice of lien has been filed under IRC section 6323, and the taxpayer’s administrative rights under IRC section 6320 (notice and opportunity for hearing upon filing of notice of lien) with respect to such filing have been exhausted or have lapsed, or for which a levy is made under IRC section 6331 [IRC section 7345(b)(1)(A)-(C); Chief Counsel Notice 2018-005].

The “greater than $50,000” amount is adjusted for inflation for each calendar year after 2016 [IRC section 7345(f); IRM para. 5.8.1.8(2)]; accordingly, IRS guidance issued in 2018 states that a seriously delinquent tax debt is an amount greater than $51,000. The IRS computes the seriously delinquent tax debt by aggregating the total amount of all current tax liabilities for all taxable years and periods meeting the criteria described above, including interest and penalties (Notice 2018-01). Any tax penalty, including preparer penalties, can form the basis of a seriously delinquent tax debt.

The IRS has broad discretion to certify a seriously delinquent tax debt, even when the taxpayer has made a request for an installment agreement or an offer in compromise. Therefore, it is crucial for tax advisors to make sure that any requests are reasonable and address any defects that resulted in previous denials.

We advise anyone who is delinquent in their taxes to work with their tax professional to remedy the situation before they are considered to be in “seriously delinquent tax debt”. And, if you are in serious delinquency, know that your passport may be in jeopardy. You can read the full IRS article here.