IRS Sends Warning Letters to Taxpayers Facing Passport Revocation
Taxpayers living overseas or traveling for months at a time may worry that they won’t receive notification of IRS passport revocation until it is too late. Find out how a newly approved warning letter can help taxpayers respond before they are certified and avoid interruptions in their international travel plans.
FAST Act Makes It Hard for Taxpayers to Reinstate Their Passports
Since the 2015 Fixing America’s Surface Transportation Act (FAST Act), the IRS has had the ability to certify taxpayers with “seriously delinquent tax debt” to the State Department for passport revocation and application denials. That statute requires the IRS to send a written notice to taxpayers at the same time the certification is sent to the State Department.
But the process of certification isn’t perfect. Sometimes people can be certified for passport sanctions even while they are in the midst of negotiating with the IRS. Other times, certification may overlook mandatory or discretionary exclusions because the taxpayer wasn’t giving notice that the IRS was preparing to take action on their debts. Taxpayers who receive these notifications have the right to challenge the IRS’s certification in federal district court or tax court, but they can’t take the State Department to court directly to get their passport reinstated. Instead, the trial court can order the IRS to send a decertification notice to the State Department if the certification was improper. Then it is up to the State Department whether it will approve any new application for a passport or a renewal application.
This process is both time consuming and expensive. What is worse, there is nothing in the process that forces the State Department to act to reinstate a person’s passport when it receives the decertification notice. Together, this creates a significant obstacle for taxpayers trying to reinstate their passports after they have been revoked.
Passport Revocation and Loss of Citizenship
For U.S. taxpayers living overseas, the loss of their passport can be inconvenient, and can interfere with their personal and professional lives. However, it isn’t the same as expatriation. When a U.S. citizen renounces, or has been deemed to have renounce his or her citizenship, it can have expensive tax consequences. Everything a “covered expatriate” owns can be deemed to have been sold on the day before their expatriation. (Coverage depends on your income, assets, and federal tax filings in the years leading up to the expatriation.) Then they will face capital gains taxes on anything beyond $711,000 in 2019. The good news is that losing your passport due to IRS passport revocation proceedings won’t automatically trigger expatriation. Instead, the IRS will look to whether:
- You renounced your nationality before a U.S. diplomatic or consular officer
- You submitted a voluntary relinquishment statement to the State Department
- The State Department issued a certificate of loss of nationality
- A U.S. Court canceled your certificate of naturalization.
While passport revocation doesn’t automatically mean you will face expatriation, it will significantly affect your ability to travel, including your ability to return to the United States. If you are living abroad when the certification happens, you may find yourself without the ability to come back home. In those cases you may petition the State Department for a limited passport for your direct return to the United States, but then you will still need to go through the same process to achieve decertification and restore your international travel abilities.
New IRS Letter Gives Taxpayers in Trouble Notice Their Passport May Be Revoked
The FAST Act doesn’t require the IRS to warn taxpayers before certifying them for passport revocation proceedings. But it also doesn’t say the IRS can’t send advance notice. Now, it has decided to do just that. This year, the IRS began issuing “Letter 6152” to taxpayers that could qualify for certification because they have more than $52,000 in seriously delinquent tax debt. This letter warns taxpayers of the potential consequences of their unpaid balances and gives them 30 days to contact the IRS and resolve their tax debts by:
- Paying the outstanding balance
- Entering into an alternative payment arrangement
- Providing facts to show that the certification was improper or an exemption should apply
By issuing this letter, the IRS is voluntarily postponing certification of the taxpayer to the State Department. If you respond to the letter and make arrangements to pay your tax debt, you can avoid the process of challenging the certification and protect your right to travel. However, you must act quickly. If you have received Letter 6152, you should contact an experienced tax attorney immediately. The IRS takes time to review offers in compromise or proposed installment agreements. Don’t let your right to travel get held up because you waited too long to make the call. Contact a tax attorney today to protect your passports, and your freedom.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years 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.