If You Are Threatened with or Received Notice of Loss of Your U.S. Passport Because You Owe Federal Taxes Retain a Tax Lawyer
In the past history of the country, U.S. persons’ passports or their eligibility for new passports would only rarely have been impacted by Federal tax considerations and never in isolation. Not anymore. During 2018, pursuant to Congressional legislation entitled Fixing America’s Surface Transportation Act (December 4, 2015), the IRS got up and running a new administrative program whereby IRS Revenue or Collection Agents are now certifying to the U.S. State Department that a particular U.S. person owes at least $51,000.00 in taxes or tax-related penalties and interest (“IRS Certification”).
IRS Certification starts in motion a fairly fast administrative procedure the end result of which for an unrepresented person is State Department revocation of the person’s passport or its refusal to issue a new passport recently requested. With interest constantly running, even a $20,000.00 Federal tax liability can grow all too quickly to over $51,000.00 so one might not have imagined this would happen to them. Situations we are familiar with include a U.S. expatriate living abroad with an expired passport while in debt to the IRS or a business executive suddenly unable to timely travel to or from the U.S. for important business negotiations. The “shall not issue a U.S. passport” and “authorized to revoke a U.S. passport” powers are qualified by “emergency circumstances” and “humanitarian reasons” subject to governmental discretionary authority to determine whether either is applicable to the situation.
The technical predicates for IRS Certification to the State Department in turn leading to a notice to a U.S. person of passport denial or revocation are straight forward and are laid out in Internal Revenue Code Section 7345. These predicates, which should be set forth in the notice, should be viewed as necessary to be verified by legal counsel, because the IRS is not always correct: the IRS had in fact “assessed” the indicated taxes, penalties and interest outstanding, the amount owed presently is greater than $51,000.00; there is in fact no valid payment plan or other agreement in effect with the IRS; the taxpayer in fact had had an opportunity for a “Collection Due Process” appeal with respect to previous IRS notices of intention to impose tax liens and/or levy property; if the IRS presented a Collection Due Process opportunity, the taxpayer either failed to timely take up the opportunity or the appeal was unresolved with an amount of debt still owed in excess of $51,000.00 and no agreement is in effect with the IRS.
Upon receipt of a notice, one must act within the notice deadlines, if any. Besides that, if the facts warrant, a U.S. Person can plead for reversal of IRS Certification on the basis of the extant emergency circumstances or on the basis of humanitarian reasons. Sometimes, alternatively, it is possible to satisfy the liability in full or agree to an IRS payment plan or make an offer in compromise. In the worst cases, where the IRS refuses to reverse a flawed IRS Certification, a U.S. Person may file an action either in Federal District Court or in the U.S. Tax Court. A court case would involve contesting an erroneous IRS Certification or asserting the IRS erroneously failed to reverse IRS Certification.
The experienced attorneys at Herold Law, P.A. can be of service to you if you find yourself in a loss or non-renewal of U.S. passport predicament. Please don’t hesitate to contact Robert S. Schwartz, Esq., at 908-679-5011 or contact him at [email protected].