Having tax debts? Your Passport could get impounded

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Did you hear that the IRS is impounding the passport of tax defaulters? Yes, if you have uncleared tax dues, then you need to take corrective measures to stop this from happening. Yes, if you have uncleared tax dues, then you need to take corrective measures to stop this from happening.

The IRS has, under the Fixing America’s Surface Transportation (FAST) Act, informed the State Departments to impound passports of taxpayers owing delinquent tax debt of up to $52000. As per the notification, taxpayers who owe taxes of more than $52000 will not be able to either apply for or renew their passports. Further, the information also enables the State to revoke your passport or limit your travel within the boundaries of the United States, until the clearance of such tax liabilities.

So, what shall be your course of action to stop this from happening? Read on to find out more about this notification and taking appropriate steps.

How do you know if your tax debt is considered seriously delinquent?

You can expect to receive the Notice CP508C from the IRS if you are certified as a seriously delinquent tax defaulter. The notice majorly aims at explaining to you about the various repercussions of having this title and possible ways of resolving your tax debt. You can also call the IRS Telephone Assistance to know all about the possible options of clearing your tax liabilities. Some of this might include setting up a payment plan or learning about other payment options.

Has your passport application been denied by the State?

If you got your passport application denied by the State and have immediate travel plans, then you shall contact the IRS to resolve such issues. By contacting the IRS, you can explore your best options to resolve this tax issue and expedite reversal of your certification to the State. If you need your case to be expedited, then you can request the IRS to shorten the processing time from 30 days to 14 or 21 days which depends on a case-to-case basis. To process such an expedition, you are required to inform the IRS that you need to travel within 45 days or that you live abroad.

What are the documents required to process the expedition?

You would be required to provide the following documents to the IRS to process your expedition: –

  1. Proof of Travel: Your proof of travel shall be able to prove the urgency of a fast expedition. It can include any document that shows the destination and date of your journey. You may use your travel itinerary, cruise tickets, hotel reservation proof, international car insurance, or any other document.
  2. Copy of State Letter denying passport application or revocation of passport: The State holds the sole authority to issue, limit, revoke or deny your passport. The IRS is required to ask the State to use its authority for limitation or revocation of your passport. So, the notification of such limitation or revocation always comes from the State. Therefore, a copy of this letter is required to be presented to process a fast expedition.

How does this linkage between the IRS and the State works?

The IRS is required to inform the State for taking action officially. The IRS can recommend the State to limit, revoke, or reject the application for renewal of your passport. If the IRS had reversed your certification because you had promised to pay, then the IRS holds the authority to recommend the State for revocation of your passport if you fail to make the payment.

The IRS can also recommend the State to revoke your passport if you seem financially secure to use your offshore activities or interests to resolve your tax debt but purposely don’t.

How do you know IRS is planning to revoke your passport?

Everything is pretty transparent in this process. Before notifying the State to revoke your passport, the IRS would send you the Letter 6152 — Notice of Intent to Request US Department of State Revoke Your Passport, to inform you of their intention to do so. This is also done to give you another chance to take corrective action and stop your passport from getting revoked.

You must contact the IRS within 30 days of receiving such a notice informing them of your intention to clear your dues. If the IRS feels that you are genuinely attempting to clear your tax debts, then they will not process further to recommend revocation of your passport.

How can you resolve this tax issue?

You can do any of the following to save yourself from facing stringent IRS sanction: –

  1. Pay your tax debt in full
  2. Clear your tax debts under an approved installment agreement
  3. Clear your tax debt applying for an accepted offer of compromise
  4. Clear your tax dues in a timely fashion through the settlement agreement with the DOJ
  5. Appeal for a pending collection due process and pay a levy
  6. Get your collection suspended by making an innocent spouse election or request innocent spouse relief

All about the relief programs for unpaid taxes:

The following are the relief programs that you can register for to clear your tax dues: –

  1. Payment Agreement: You can fill the Form 9465 and ask for a tax payment plan. You can download this form from the IRS website and mail it to them along with your tax return, bill, or notice. Additionally, you can also register yourself for an Online Payment Agreement and set-up a monthly payment plan. By doing so, the installment amount will be directly deducted from your account, and you would not be required to do it yourself every month. The Online Payment Plan is also cheaper and would save you valuable time.
  2. Offer in Compromise: If you qualify for an Offer in Compromise, then you can settle your tax liabilities for an amount lesser than the actual amount through this agreement. The IRS will assess your income and assets to judge your inability to clear your tax dues. You can use the Offer in Compromise Pre-Qualifier tool to ascertain if you are eligible for the Offer in Compromise agreement or not.

In what conditions does IRS not certify you as a delinquent tax defaulter?

The IRS will not certify you as a delinquent tax defaulter or will reverse the certification if: –

  1. You are a bankrupt
  2. You have been a victim of a tax identity theft
  3. The IRS has determined your account as non-collectible because of financial hardship
  4. You are located in a federally announced disaster area
  5. Your request for installment payment is due with the IRS
  6. Your request for Offer in Compromise is due with the IRS
  7. You have an IRS accepted adjustment which can satisfy the tax debt in full

Bottom Line

Hence, if you have received the Notice CP508C of the IRS, then it’s time to immediately take corrective action to clear your tax dues. If you don’t have the financial capacity to pay the amount in full, then you can apply for the various payment schemes available for such tax defaults. Taking timely action is very important; otherwise, it may impound your passport or reject a new passport application. Feel free to contact the experts from MyTaxFiler and understand all your options and save yourself from this tax crisis.

Reference Article: https://www.irs.gov/newsroom/individuals-with-significant-tax-debt-should-act-promptly-to-avoid-revocation-of-passports

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