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‘Seriously Delinquent’ Tax Debt? Say ‘Bon Voyage’ to your Passport

So you’re finally ready to plan that dream trip to Paris after a year of strict financial planning? Before you book your flight, better check your latest individual income tax return and confirm you don’t owe an outstanding balance to good ol’ Uncle Sam.

Starting this year, the U.S. government will deny passport applications if the IRS certifies you’re “seriously delinquent” on a tax debt. Even if you already hold a valid passport and the IRS provides valid certification regarding your tax obligation, the State Department maintains the authority to revoke your passport.

The Fixing America’s Surface Transportation (FAST) Act requires the State Department to deny your passport application if you owe an “unpaid, legally enforceable federal tax liability” assessed by the IRS if:

  • Your outstanding balance totals more than $51,000 (including interest and penalties and adjusted annually for inflation);
  • A notice of federal tax lien has been filed and certain administrative rights have been exhausted or lapsed; or
  • A levy has been issued.

Codified as Internal Revenue Code (“IRC”) 7345, seriously delinquent tax debt is limited to liabilities under IRC and doesn’t include other outstanding IRS debts such as penalties associated with the failure to file Foreign Bank Account Reports (FBAR penalties).

To avoid passport issues and prevent your tax debt from being categorized as seriously delinquent by the State Department:

  • Arrange an installment agreement with the IRS;
  • Begin paying your tax obligation pursuant to an offer-in-compromise that has been accepted by the IRS and entered into with the Department of Justice;
  • Request a timely collection due process appeal hearing in connection with an IRS levy;
  • Apply for innocent spouse relief under IRC 6015;
  • Notify the IRS immediately:
    • if you’ve filed for bankruptcy
    • if you’re a victim of tax-related identity theft
    • if you’re located in a federally declared disaster area

Simply requesting a payment arrangement won’t prevent the IRS from denying your passport; you must already have an installment agreement in place or already hold a fully accepted offer-in-compromise to avoid passport issues.

For questions regarding your eligibility for a relief program, refer to the free IRS site, Offer in Compromise Pre-Qualifier or request a payment agreement by filing IRS Form 9465.

If you need a proven tax accounting firm to assist with your individual or business tax preparation or financial planning, our team remains ready to assist you. Contact us at Office@CPAsite.com or 904-396-5400.

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