As the holidays approach, many taxpayers have travel on their minds and some of your clients may be affected by the Fixing America’s Surface Transportation Act (FAST Act). This act allows the IRS to pass along taxpayer information to the US State Department so delinquent taxpayers’ passports can be revoked or limited. It can be an extremely stressful situation for any taxpayer so make sure your clients are aware of the ins and outs of how this act works.
Fixing America's Surface Transportation Act
In 2015, the FAST Act was enacted into law. This act, among other things, assists the IRS in collecting outstanding tax debts from taxpayers. This act requires the IRS to provide information to the State Department regarding delinquent tax debt. If the taxpayer has “seriously delinquent tax debt,” the State Department can revoke the passport of the taxpayer until the debt is paid.
Seriously Delinquent Tax Debt
“Seriously delinquent tax debt” = a federal tax liability (including penalties and interest) that totals more than $50,000. The IRS must have also filed a lien or levy in order for the debt to fall into this category. Taxpayers who have entered into installment agreements or have an active offer in compromise with the IRS will not fall into this category.
Once the IRS has identified an individual as having “seriously delinquent tax debt,” then their information can be turned over to the State Department (per Internal Revenue Code Section 7345). This information is turned over by a CP 508C notice. The IRS is required to notify the taxpayer in writing at the time the IRS certifies seriously delinquent tax debt to the State Department. Once the State Department has this information, they can choose to revoke or limit the use of an individual’s U.S. passport until the situation is resolved.
Seriously delinquent tax debt is a federal tax liability (including penalties and interest) that totals more than $50,000.
How to Handle Passport Revocation
Under the Act, the State Department can even deny the application for a passport if there is delinquent tax debt. The State Department will hold the passport application for a grace period of 90 days to allow the taxpayer to:
- Resolve any erroneous certification issues
- Make full payment of the tax debt
- Enter into a satisfactory payment alternative with the IRS
The tax debt doesn’t need to necessarily be paid off—there just needs to be a good faith effort by way of an OIC, installment agreement, innocent spouse relief, etc. The IRS wants taxpayers to know that they can make alternative payment arrangements so that their certifications can be reversed. If the taxpayer recently filed their tax return for the current year and expects a refund, the IRS will apply the refund to the debt, and if the refund is sufficient to satisfy the tax debt, the IRS will release the passport.
If the taxpayer recently filed their tax return for the current year and expects a refund, the IRS will apply the refund to the debt.
Reversal of Seriously Delinquent Tax Debt Status
The IRS website outlines scenarios where a previously certified debt is no longer seriously delinquent:
- The taxpayer and the IRS enter into an installment agreement allowing the taxpayer to pay the debt over time.
- The IRS accepts an offer in compromise to satisfy the debt.
- The Justice Department enters into a settlement agreement to satisfy the debt.
- Collection is suspended because the taxpayer requests innocent spouse relief under IRC § 6015.
- The taxpayer makes a timely request for a collection due process hearing in connection with a levy to collect the debt.
The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable.
The taxpayer does have the option to file suit against in U.S. Tax Court or District Court to determine where the original IRS determination was wrong. If the court determines the certification is erroneous or should be reversed, it can order the IRS to notify the State Department that the certification was in error. Most taxpayers, however, simply contact the number on their 508C notice and establish some sort of agreement with the IRS so they can be in good standing and reclaim their passports.