The certification of a seriously delinquent tax debt will not prevent return travel to the United States. The State Department can issue passports for direct return to the United States for individuals whom the IRS has certified as having a seriously delinquent tax debt.
How can the IRS share tax information with the State Department without violating the taxpayer privacy provisions of IRC section 6103?
Other statutes have been amended to facilitate the enforcement of IRC section 7345, including IRC section 6103. IRC section 6103 now permits the IRS to provide information to the State Department regarding the taxpayer’s identity and the amount of the seriously delinquent tax debt. Officers and employees of the State Department can only use this information for purposes of carrying out IRC section 7345, and not for any other purpose.
Does action under Tax code section 7345 or the filing of an action for judicial review of the certification of a seriously delinquent tax debt require the IRS to suspend collection?
No. The IRS can, and likely will, continue with enforced collection action against the taxpayer, as IRC section 7345 does not stop collection.
It depends. If the taxpayer’s account was previously certified and the taxpayer incurs an additional liability, and the total liability meets the threshold for certification, the aggregate assessed balance will recalculated to include the new liability. If the total amount is under the threshold, the new amount will not be included.
This law only applies to seriously delinquent federal tax debt. In other words, back taxes due to the IRS and not your state taxing authorities. However, some aggressive state taxing authorities, like New York, may try to implement a similar strategy in the future. For example, the New York State Department of Taxation and Finance has had great success in collecting back tax liabilities by revoking driving privileges.
Yes. Although these penalties may begin as the liability of a business and not an individual, once assessed under IRC section 6672, these liabilities are the debts of the responsible individual and can be the basis for a seriously delinquent tax debt.
What about penalties and interest? Are they included in reaching the $51,000 or is that number just the amount of the tax liability itself?
The total amount due to the IRS for the federal tax liability of an individual, including tax penalties and interest, is included in the $51,000.
What does “seriously delinquent tax debt” cover? Does it include FBAR penalties or state and local taxes?
The liability must be the federal tax liability of an individual; accordingly, state and local taxes will not give rise to passport action. In addition, IRS assessments that fall outside of the IRC—such as FBAR penalties, which are assessed under Title 31, the Bank Secrecy Act—cannot be the basis for passport action.
After the IRS has issued the certification, can passport revocation or denial be avoided by making a payment to reduce the debt to below $51,000?
No. For reversal of certification, the debt must be paid in full, not just paid below $51,000.
The certification and revocation process are recent additions to the Service’s collection actions, so timing is uncertain. However, the IRS has already created computer codes to identify accounts eligible for certification. IRM 22.214.171.124.6 (12-20-2017). The Internal Revenue Manual indicates that “[t]axpayer certifications will be provided systemically to State Department on a weekly basis.” 126.96.36.199.6(4) (12-20-2017). Therefore, the certifications should be quick. Once the Notice of Certification (Notice CP508C) has been issued, it will be too late for taxpayers to reverse the action as certification is made to the Department of State simultaneously. The only remaining recourse is the certification reversal process.