The IRS can pass along taxpayer info to the State Department so delinquent taxpayers’ passports can be revoked or limited.
1 min read
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.
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” = 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.
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:
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.
The IRS website outlines scenarios where a previously certified debt is no longer seriously delinquent:
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.
Explore more of our recent Articles, User Stories, and Ebooks.
6 min read
Eva Rosenberg, MBA, EA, known as the Internet’s TaxMama®, publishes the popular TaxMama.com website, cited by Consumer Reports magazine as a top tax advice site, and a LIFE Magazine Editor’s Pick.
3 min read
Canopy takes the headaches out of client management by offering a way to keep client info organized.
I love how easy it is to setup a new client in this software. Once set up, it's one click to get IRS transcripts downloaded for my review. This saves me at least an hour each week in comparison to the software I used to use.
This makes workflow for tax resolution manageable. This business is a bunch of hurry up and wait. This system helps to refresh my memory while transitioning to different clients.
The ability to securely share documents with clients as well as complete POAs from client contact data already in Canopy. The ability to route workflow between team members with color coded statuses allows us to work efficiently.
Cool features, outstanding customer service, constantly updating to make it better. I love that I can upload files easily to a secure client portal and we don't have to email files anymore. Absolutely can't imagine not having this software.
It's safe and secure. Clients are able to upload documents and the documents are saved their portal which as a result, keeps us better organized. The task feature keeps us organized and we know exactly the status of each client.
Submit this form, and we will be in touch soon to give you a custom demo.
Set a time for one of our product specialists to give you a guided tour practice.
Leave a comment!