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The IRS has started to send certification of individual taxpayers with seriously delinquent tax debt to the State Department for passport consequences under the FAST Act. Your options to appeal this determination are limited. Know what to look for and what to do if you are certified for passport revocation by the IRS.
The Fixing America's Surface Transportation Act of 2016 (FAST Act) gives the IRS the authority to certify individual tax payers for passport consequences if they have a total seriously delinquent tax debt (SDTD) over $51,000. That certification requires the State Department to deny any passport applications or renewals, and allows the department to revoke existing passports. A previous post addressed who can be certified for passport revocation and what exceptions may apply.
The FAST Act has only been law since 2016, and the IRS only began instituting it for the 2017 tax year. But already, IRS Small Business / Self-Employed Division Commissioner Mary Beth Murphy said her division has identified around 600,000 taxpayers who could be certified for passport revocation under the new law. After applying the statutory and discretionary exclusions, about 30,000 taxpayers have been designated as having seriously delinquent tax debt. These taxpayers have been notified by the IRS that their cases are being turned over to the State Department for passport consequences. She offered little solace to taxpayers facing the loss of their ability to travel, saying:
"Right now we're not revoking passports . . . but we can. . . . We don't want to be punitive."
The notices are form CP5089C. They list each tax liability included in the debt, along with the amount and the date assessed. The form includes information about a taxpayer's rights to hearings and other processes related to the request. It can be overwhelming. It may not even be immediately apparent that you have been certified for passport revocation. You may need to read the fine print to know the travel consequences connected to your tax debt.
Certification doesn't mean tax consequences will follow immediately. To avoid overloading the IRS's internal systems, SB/SE has been sending certifications to the State Department a couple thousand at a time. That means if you have received a notice that you have been certified for passport revocation from the IRS, now is the time to act.
Being certified for passport revocation can seriously affect your life and your livelihood. If you spend significant time overseas, or need to travel internationally for work, even a temporary interruption in your ability to travel can be devastating. Because the certification notices go out "contemporaneously" (meaning at about the same time) as the certification itself, you may only have a limited ability to appeal your certification and have it reversed.
The FAST Act requires the IRS to reverse a certification for passport consequences if:
The law requires the IRS to exclude cases:
In addition, the IRS has announced discretionary exemptions for cases where the taxpayer is:
As you can see, to qualify for a reversal of certification, you generally need to be taking steps toward a full satisfaction of your outstanding tax obligation. If you receive notice that you are certified for passport revocation by the IRS it is essential that you talk to a tax attorney right away to begin negotiations and move you toward a discretionary or statutory exemption.
The FAST Act allows anyone who has been certified for passport revocation to file a civil suit in Tax Court or in the United States District Court challenging the certification. However, the basis for challenging certification could be limited to administrative problems with the IRS's accounting system.
A chief counsel notice (CC-2018-005) issued by the IRS says the Service will use automated systems to identify taxpayers with unpaid tax liabilities that could qualify as seriously delinquent tax debt. When all the eligible tax liabilities add up to that $51,000 threshold, the taxpayer will receive a CP5089C notice that they have been certified for passport revocation and the tax liabilities will be flagged in the system.
Because the FAST Act does not explicitly allow the courts to review the amount of the liability in determining a seriously delinquent tax debt, the law does not waive the IRS's governmental immunity to liability challenges. That means certification challenges will be limited to a review of the administrative record - in this case, ensuring the automated systems functioned properly. Other defenses, including whether the tax debt was properly assessed in the first place, may not be addressed in federal court, because the law prohibits any lawsuit that would restrain the IRS from assessing or collecting any tax except in certain circumstances.
If you receive notice that you have been certified for passport revocation, you need to act fast to be certain your right to travel isn't at risk. By working closely with an experienced tax attorney, you may be able to arrange installment payments or correct administrative errors to reverse the IRS's certification and protect your passport.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years experience. If you have questions regarding SDTD or Notices of Certification for the revocation or denial of passports due to tax debt, contact Joe Viola to schedule a consultation.