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Large Tax Debt? You May Lose Your Passport

The State Department may revoke, deny or limit your passport if you have a large tax debt.

As part of the FAST Act, a new code section was added to the Internal Revenue Code: Section 7345 “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”

Under Section 7345, the IRS can provide certification to the State Department that an individual has a seriously delinquent tax debt. Once the State Department receives the certification, the State Department may deny the issuance of an individual’s a passport, revoke an individual’s passport or limit the individual’s previously issued passport for return travel to the United States only. A “seriously delinquent tax debt” refers to a federal tax liability that has been assessed, is greater than $50,000 and with respect to which a notice of lien has been filed and administration rights with respect to such filing have been exhausted or lapsed or a levy is made. It is important to note that the greater than $50,000 tax liability includes interest and penalties.

In addition to providing the certification to the State Department, the IRS will also notify the taxpayer of the certification and of the taxpayer’s right to bring a civil action against the United States in a district court or Tax Court to determine whether the certification was erroneous or whether the IRS has failed to reverse the certification.

The IRS’ certification will be reversed and the State Department notified if it is determined that the certification was made in error or if the tax liability for which the certification is based ceases to be a “seriously delinquent tax debt.” A tax debt will cease to be a “seriously delinquent tax debt” if it is being paid in a timely manner pursuant to an installment agreement or offer in compromise or if collection of the debt is suspended because a due process hearing is requested or pending or because an election is made pursuant to IRC 6015(b, (c) or (f) [innocent spouse]. Once the Secretary of State receives notice from the IRS that an individual ceases to have a seriously delinquent tax debt, the certification will be removed from the individual’s record.

Authors: D. Sean McMahon and Elissa Burton