Optima CEO David King and Lead Tax Attorney Philip Hwang answer questions on how taxpayers can avoid getting their passport seized by the IRS.
As of March 14, 2021, the IRS resumed their Passport Certification program, and in doing so has notified the Department of State about taxpayers that are certified as owing a seriously delinquent tax debt. The IRS previously suspended certain collection activities, including passport certification, under the People First Initiative, which was created in response to the Coronavirus pandemic.
Taxpayers who are delinquent with their tax debt should expect to receive a notice informing them of their balance due. It is recommended that individuals pay off their tax liability or enter into a payment agreement with the IRS to avoid any collection action and having their passports revoked. The level of action the IRS takes against an individual is typically based on the amount owed and how long the taxpayer has been delinquent without contacting the IRS to resolve their tax balance.
The IRS is typically required by law to certify individuals to the Department of State when an individual has unpaid, legally enforceable federal tax debt over the amount of $54,000 (including interest and penalties), of which a federal lien has be filed against and all administrative remedies under Internal Revenue Code Section 6320 have lapsed or been exhausted. The IRS is also required to certify any individuals who have had a levy issued against a tax debt of that size.
If a taxpayer has a large tax debt amount, the State Department typically will not renew or issue out a new, passport after receiving certification from the IRS, and in some extreme cases, they may even revoke someone’s current passport. Taxpayers living and working overseas will have a limited validity passport issued out by the State Department that is only valid for a direct return to the United States. Before a passport renewal or new passport application is denied, the State Department will typically hold a taxpayer’s application for 90 days to allow a taxpayer to:
- Pay any owed tax debt in full.
- Enter into a payment arrangement with the IRS.
- Resolve any erroneous certification issues.
Once a taxpayer has resolved their tax issue, the IRS will generally reverse the certification within 30 days of the date of resolution and provide notification to the State Department.
Resolve your tax situation
The IRS provides a variety of programs that assist taxpayers in resolving their tax obligations including payment agreements and Offers in Compromise. In some cases, if the IRS determines a taxpayer is in a financial hardship and cannot pay any of their tax debt, a temporary delay will be made to the collection process.
Taxpayers who recently filed their tax return for the current year and expect a refund should be aware that their refund amount will be applied to the total debt owed until it has been paid in full. If the refund is enough to satisfy a delinquent tax debt, the IRS will consider the account paid in full. Taxpayers are warned to not solely rely on this option and resolve their tax issues as soon as possible in order to avoid collections with the IRS.