Your Delinquent Tax Debt Can Now Result in Your Passport Getting Revoked

The Fixing America's Surface Transportation Act, H.R. 22, was passed by Congress on Thursday and signed into law by President Obama on Friday. This new law includes provisions (See SEC. 7345) that require the secretary of State to revoke, deny, or limit the passport of anyone deemed to have seriously delinquent tax debt. According to the Journal of Accountancy, "seriously delinquent tax debt is defined as an outstanding tax debt in excess of $50,000 (adjusted for inflation) for which a notice of lien or a levy has been filed, unless the individual is making timely payments under an agreement with the IRS or collection is suspended because a Collection Due Process hearing or innocent spouse relief has been requested or is pending."

Fixing America’s Surface Transportation Act, H.R. 22, which Congress passed on Thursday - See more at: http://www.journalofaccountancy.com/news/2015/dec/third-party-tax-collection-provisions-201513492.html#sthash.01wkBgBW.dpuf

Fixing America’s Surface Transportation Act, H.R. 22, which Congress passed on Thursday - See more at: http://www.journalofaccountancy.com/news/2015/dec/third-party-tax-collection-provisions-201513492.html#sthash.01wkBgBW.dpuf

Possible loss of passport will be included in notices the IRS sends to taxpayers to inform them of potential collection activities. Taxpayers will also be notified when the IRS sends a certification of serious delinquency to Treasury. That certification will then be sent to State Departments for use in determining whether to issue, renew, or revoke a taxpayer’s passport. Taxpayers are considered ineligible for a passport if their names appear on the certification lists. 

The new law also requires the IRS to enlist the assistance of third parties for debt collection actions on certain outstanding accounts (See SEC. 32102). In the past, the decreasing IRS budget might have hindered those efforts, so taxpayers may have had limited interaction with them about their debt. That will likely no longer be the case. The inactive tax receivables that are included in the new law's provisions are those that (1) have been removed from the IRS’s active inventory due to lack of resources or the inability to find the taxpayer; (2) for which more than one-third of the applicable limitation period has passed and no IRS employee has been assigned to collect the receivable; or (3) that have been assigned for collection, but more than 365 days have passed without interaction with taxpayers in order to collect on the debt.

Tax debts relating to pending or active offers in compromise or installment agreements as well as those under examination, litigation, criminal investigation, or levy or currently subject to a right of appeal are not to be included in the collection efforts under the new qualified tax collection contracts.

For questions about how this new law impacts your specific situation, please reach out to your Certified Public Accountant (CPA).