Is it just an empty threat from the IRS?
If you owe taxes, the IRS have stated that they can deny a passport application or even revoke your passport. You may have read in the press that it actually happens, but have an understanding that it is not all that common. You may be thinking that it just an empty threat from the IRS to ensure people file their returns and pay taxes. Although it is tedious work to find people and take their passports away, the IRS will go to any extent to get their money. The US Treasury has spent so much implementing tax programs for Americans living abroad, that it is no surprise they need to pull money back into what they have invested. So, we have spoken with a specialist to provide you with advice based on a recent case.
What happens if the IRS certifies me as having seriously delinquent tax debt?
If the IRS has certified you as owing seriously delinquent tax debt, then when you are applying for a passport you will receive a letter from the Department of State stating that you are ineligible and to contact the IRS within 90 days. Before your passport is denied, the State Department will hold your application for 90 days to allow a full payment of debt to be made, the resolution of erroneous certification, or enter a payment arrangement. Otherwise, the State Department has the right to deny a new passport application and also to revoke an existing passport.
What is the threshold of tax debt for the IRS to revoke or deny a passport?
The IRS will revoke a passport or deny an application under ‘seriously delinquent tax debt’. This means if you have unpaid taxes totalling more than $53,000 USD (although this amount is adjusted annually to reflect inflation). FBAR penalty and child support tax debt is not included.
What notice will be sent to me if my passport application is denied?
If the IRS certifies you as owing seriously delinquent tax debt to the State Department, you will be sent a Notice CP508C by mail at the same time. If you manage to get this certification reversed, you will be sent a Notice CP508R from the IRS within 30 days. This signifies that the debt has been fully satisfied, is no longer seriously delinquent, or the certification was rendered erroneous.
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What notice will be sent to me if my existing passport is revoked?
The IRS may request the State Department to revoke your existing passport if you have seriously delinquent tax debt. They will also request to take your passport if you had been given a certification reversal because you promised to pay and have failed to pay back the debt. Before sending a referral of revocation to the State Department, the IRS will notify you in writing by sending a Letter 6152 and give you 30 days to all the IRS to reach a resolution.
Are there circumstances where my passport won’t be revoked even if I meet the debt threshold?
There are certain exceptions under which the IRS will not label someone as owing a seriously delinquent tax debt. These include cases of bankruptcy, victims of tax-related identity theft and a few other circumstances that are specified on the IRS’ website. Likewise, the IRS will postpone certification of those serving in a combat zone.
A recent passport held story
Tanveer has just dealt with a case where a client who owed back taxes had her baby’s passport held by the consulate. This client had given documents and returned for a secondary appointment, where she found the consulate would not give her the passport as she owed back taxes. She had been living overseas and not filing some taxes.
The client was given two options – either pay the tax bill off completely within the next 90 days or take a one-way ticket back to the US on a travel document. For Green Card holders, the options are even more limited. They must prove they filed taxes, and some Green Cards have even been taken away and the previous holders have been requested to take a flight back out of the US.
They took advantage of specialist help to go through the possibilities for getting their seriously delinquent tax debt certification reversed and getting their passport back.
What could be done to get her passport back after it had been revoked?
After the client called Tanveer, they immediately began to collect all of the data and facts. Within one day of calling up Tanveer, they had tracked down all of the taxes and interest that had been accumulated. After collecting the facts, specialists such as Tanveer are able to represent the client in talking to the IRS to try to minimise the debt, or the client can call the IRS and see if there are abatement possibilities.
The IRS had traced her debt back all the way to 2007, and the money she owed totalled to about $70,000 USD. Fortunately, she was able to reach a final settlement of about $38,000 USD and made the payments within a week’s time. Tanveer and the client sent off the data to the consulate who returned the passport within a week.
How do I get my seriously delinquent tax debt certification reversed?
If the entire debt is paid, the IRS will decertify within 30 days. If the amount certified falls below the seriously delinquent debt threshold ($53,000 USD), the penalty may be abated, and the IRS can reverse the certification.
After receiving the passport and having the certification reversed, it is also vital that you become tax compliant as soon as possible. Tanveer also worked with the client to help her become tax compliant through the Streamlined Tax Amnesty Programme, which you are still able to use to come into compliance.
We can help you to achieve a positive outcome
Every possibility was considered to minimise taxes, and ultimately, they were able to cut the tax costs in half and the abatement worked a great deal to save her money. The certification was reversed, and they retrieved the passport back quickly in addition to being able to get the client tax compliant.
Contact us at Expat US Tax to have an initial free 20-minute consultation regarding your U.S. Passport and ways to save you money. We are also able to file tax returns on your behalf should you need it under a pre-agreed fee that won’t be adjusted through the process.