How to Contest an IRS Passport Certification of Seriously Delinquent Tax Debt
An IRS passport certification of seriously delinquent tax debt can cause the passports of U.S. taxpayers living overseas to be revoked or not renewed, leaving you scrambling to avoid disrupting your life in another country. Here is what you can do to contest the IRS passport certification if you believe it was entered falsely.
Step 1: Keep Your Address with the IRS Current, Even When Overseas
The first step to contesting a certification of seriously delinquent tax debt starts before your passport ever enters the equation. As an expatriate, you must keep your international address current with the IRS to receive essential notices from the government warning you of unexpected tax obligations, and even identity theft.
That is what happened to Uriah I. Shitrit. A dual citizen of the U.S. and Israel, Mr. Shitrit had been living in Israel for many years. In 2017, he filed U.S. federal income tax returns for 2014, 2015, and 2016, trying to claim a $3,000 overpayment of his income withholdings. Instead, he received an international letter sent to his Israeli home. It said the money had been applied to a decade-old tax liability and that he still owed $222,654 for taxes from 2006.
Why hadn’t Mr. Shitrit learned of this sooner? Because he hadn’t listed his Israeli address with the IRS. All the notices related to the 2006 tax return had been sent to a mail drop business in Burbank, California that Mr. Shitrit had not visited in over a decade. Notices issued by the IRS as early as 2011 had been returned as undeliverable, but possibly due to internal issues at the IRS, the government continued to use the Burbank address for all his tax collection notices.
Step 2: Receive a Notice of Certification of Seriously Delinquent Tax Debt
When the IRS determines that you owe enough to warrant passport restrictions, it can certify you as a taxpayer with seriously delinquent tax debt under the Fixing America’s Surface Transportation Act of 2016 (FAST Act). This step may be the first time you, as an international U.S. taxpayer, learn there is a problem with your taxes. While some U.S. taxpayers engage in extensive negotiations with the IRS, for others, an unpaid tax debt, along with interests and penalties, can quickly surpass the threshold for a seriously delinquent tax debt. If you were unaware of the need to file, and had not received other notices because of problems with step one, your notice of passport certification may seem to come out of nowhere.
On July 23, 2018, with Mr. Shitrit’s new Israeli address on file, the IRS issued a Notice CP508C, Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the State Department. That certification meant that the Secretary of State would deny any attempts to renew Mr. Shitrit’s passport, and could revoke the one he was using to live overseas. The IRS had issued the passport certification based the Commissioner’s determination that Mr. Shitrit:
- Had unpaid tax liabilities the IRS could legally enforce
- Owed more than $51,000
- Did not have an installment agreement or consent agreements with the IRS
- Had passed the opportunity to appeal his tax debt or request a due process hearing
Step 3: Ask the Tax Court to Review the IRS Passport Certification
If you believe the IRS passport certification was issued incorrectly, as a taxpayer, you may file a complaint in the U.S. Tax Court to have the certification reversed. Mr. Shitrit, while still living in Israel, filed his complaint on October 25, 2018, just three months after the IRS issued its notice. He asked the court to conclude:
- He did not have a seriously delinquent tax debt
- The IRS failed to send the tax delinquency notices to the correct address
- He was not liable for any additional tax, interest, or penalties for 2006
- He was entitled to a $3,000 refund for the tax overpayments in 2017
However, the court’s authority to review passport certifications is very limited. When a taxpayer requests review of the IRS passport certification under the FAST Act, the U.S. Tax Court may only reverse a certification made in error. It may not review the underlying tax obligations. As the court explained in Mr. Shitrit’s case, it can only consider:
- Whether the assessed tax liability exceeded $51,000
- Whether the IRS had begun collections proceedings
- Whether there was a collections due process hearing pending
- Whether the taxpayer was paying timely under an installment agreement or other collection alternative
Step 4: Negotiate the Seriously Delinquent Tax Debt With the IRS
If you believe the underlying tax liability is incorrect, you and your tax attorney should still file the complaint to review the passport certification, since you only have a limited time to do so. However, while the complaint is pending, you should then go back to the IRS to address the debt itself.
Mr. Shitrit did not live in the U.S. in 2006, and he did not file a U.S. tax return. However, three companies, New Century Mortgage Corp., Wilshire Credit Corp., and Titan Realty Services, reported that he had received income from them during the year. It turns out, someone had stolen Mr. Shitrit’s identity. When Mr. Shitrit presented evidence of this identity theft to the IRS, the government determined that it could not establish Mr. Shitrit had received proper notice of his tax debts, as required by the FAST Act, and abated the outstanding 2006 tax debt.
Step 5: Get the Certification Reversed (One Way or the Other)
In addition to abating the past-due tax obligations, the IRS reversed its certification of Mr. Shitrit as a taxpayer with seriously delinquent tax debt and sent notice to the Secretary of State. His U.S. passport and international travel rights were secure. But what about his tax court case?
After reversing its passport certification, the IRS filed a motion to dismiss Mr. Shitrit’s case. It said that the certification issue was moot and the other issues (the 2006 tax liability and the 2017 overpayment) were outside the scope of the court’s jurisdiction. The Tax Court agreed based on the limited review allowed under the FAST Act and dismissed the case.
However, if the IRS will not correct its certification, you may still be entitled to relief from the tax court. If the court reviews the IRS’s certification of seriously delinquent tax debt and finds it was made in error, or without the proper notice, the court can reverse that certification and send notice to the Secretary of State. This decertification order has the same effect as the IRS’s reversal -- it removes the restrictions on your passport and allows you to travel freely as a U.S. citizen.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years of experience. If you have questions regarding seriously delinquent tax debt or Notices of Certification for the revocation or denial of passports due to tax debt, contact Joe Viola to schedule a consultation.