The IRS has begun certifying federal tax debts of more than $50,000 to the State Department, which poses problems for travelers. Why? Because the State Department generally won’t issue passports to taxpayers who have been flagged for delinquencies.
Internal Revenue Code 7345 allows this. Once the State Department is notified, it can either deny a passport application and/or revoke a current passport. If it happens while a taxpayer is out of the country, the State Department may issue what’s called a limited validity passport that only allows a taxpayer’s direct return to the U.S.
However, the State Department will hold a passport application for 90 days before denying it. That allows taxpayers to resolve a certification done in error, pay the debt in full or enter into a payment agreement with the IRS.
The IRS issues Notice CP 508C to the State Department when it certifies taxpayers as delinquent and Notice CP 508R when the certification is reversed.
Seriously delinquent debt is limited to that incurred under U.S. Code Title 26 and doesn’t include certain debts that the IRS collects, such as child support.
The IRS, however, won’t reverse the certification in which a taxpayer requests a collection due process hearing or innocent spouse relief on debt uninvolved with the certification. The agency also won’t do a reversal if the taxpayer pays the debt beneath the $50,000 threshold.
A previously certified debt is not considered seriously delinquent when taxpayers enter into an installment agreement with the IRS, the IRS accepts an offer in compromise to satisfy the debt, the Justice Department enters into a settlement to satisfy the debt, collection is suspended when a taxpayer requests “innocent spouse relief” under Internal Revenue Code 6015, or taxpayers request a collection due process hearing.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.