In the 2021 tax season, there were over 8.1 million new taxpayer delinquent accounts. Delinquent accounts don’t always lead to IRS passport confiscations, but seriously delinquent tax debt can lead to passport revocation.
To understand what this means, you need to know about certified and non-certified IRS tax debt. Keep reading to learn more about this and what to do if it happens to you.
Certified IRS Tax Debt
Seriously delinquent tax debt, unpaid debt totaling more than $55,000, is certified to the State Department by the IRS. Seriously delinquent tax debt is legally enforceable and includes interest and penalties.
A notice of federal tax lien must be filed and other remedies for debt must be exhausted before the IRS can certify debt. This can also happen if a levy has been issued.
The debt can include:
- Individual Income Taxes
- Trust Fund Recovery Penalties
- Civil Penalties
- Business Taxes
When you have seriously delinquent debt due to unpaid taxes, the IRS, under the law, can certify the debt for the State Department to take action.
The State Department won’t issue a new passport if you have an application open once they receive this notification. They can also take away your current passport.
If you are overseas with delinquent debt, the Department of State can issue a limited validity passport. This is only good for a direct return to the country.
Non-Certified IRS Tax Debt
There are certain situations and debts that aren’t included in seriously delinquent tax debt. For example, child support and the Report of Foreign Bank and Financial Accounts (FBAR) are not considered part of seriously delinquent tax debts.
If you pay your tax debt through an IRS-approved installment agreement, you won’t be faced with an IRS passport revocation. The IRS can also help you pay your debts through a settlement agreement.
The IRS won’t certify debt to the State Department for those who are:
- Identified by the IRS as a victim of identity theft
- Located within a disaster area that is federally declared
- Facing hardship and the IRS has determined that taxes are not collectible
- In the process of requesting an installment agreement
- Paying through IRS-accepted agreements that pay off the full amount
Those requesting innocent spouse relief or are waiting for a collection due process hearing won’t have their debt certified by the IRS.
What Is the Debt Certification Process?
When the IRS sends a notice of seriously delinquent debt to the State Department, they will also send it to you via mail.
Before denying a passport application, the State Department will give you 90 days to:
- Make full payment of the debt
- Resolve erroneous certification issues
- Enter a satisfactory installment agreement with the IRS
If the IRS reverses the certification, they will also send you a notice in the mail. They will reverse the notification when:
- The certification is deemed erroneous
- Tax debt is paid off
- Tax debt becomes legally unenforceable
- Tax debt is no longer seriously delinquent
It will take about 30 days for the IRS to make this reversal and give notice to the State Department.
Referral to Revoke a Passport
The State Department has the authority to revoke a passport and the IRS may ask the State Department to exercise this right.
The IRS recommends revocation when they reverse your certification but you still fail to pay your debts. They can also issue a referral to revoke the passport if you choose not to use offshore activities or interests to pay the debt.
You can prevent this action beforehand. The IRS will send you Letter 6152 asking you to call them within 30 days to resolve your tax debt. If you don’t, they will issue a referral to the State Department to revoke your passport.
Can You Prevent IRS Passport Confiscation?
The best way to prevent IRS passport confiscation is by paying your federal taxes. If you can’t afford the full amount that you owe, make alternative payment arrangements to reverse the certification.
Fiscal Solutions Group can help you negotiate a payment plan with the IRS to pay off the taxes that you owe. Financial experts can help you understand your specific tax situation to determine which payment options are available.
The payment options are:
- Full payment
- Short-term payment plan
- Long-term payment plan (installment agreement)
An installment agreement is common because it allows debt payers to pay down their debt monthly. When you request a payment plan or installment agreement, the IRS cannot issue a levy.
Once you work with financial experts to settle on a payment plan with the IRS, you can use the Online Payment Agreement tool to change these details:
- Monthly payment amount
- Monthly payment due date
- Convert an existing agreement to a Direct Debit agreement
- Change the bank account and routing number on the Direct Debit agreement
- Reinstate after default
It’s important to speak with your financial advisor before revising your payment plan with the IRS.
Avoid Defaulting on Your Payment Plan
If you settle on a payment plan with the IRS, you are not in the clear. You can still have your passport application denied or your current passport revoked if you promise to pay your debts and then fail to do so.
These are the basic strategies to use to avoid defaulting:
- Pay your minimum monthly payment or more when it is due
- File all tax returns on time and pay taxes in full
- Make scheduled payments even if a refund is applied to your account
- Confirm your payment information
If your installment plan defaults, there might be a reinstatement fee. Penalties and interest will continue to accrue until your balance is fully paid off.
Professional Tax Advice
When faced with seriously delinquent tax debt, you risk IRS passport confiscation. To help with this extraordinary tax situation, reach out to professionals for tax advice.
Fiscal Solutions Group can assist you with your debt and negotiate a plan for repayment with the IRS on your behalf.Contact us today to learn how you can benefit from our services.