Understanding How Tax Debt Can Impact Your Passport
The IRS has the authority to restrict or revoke your passport if you owe a significant tax debt. This power, which involves certifying your tax debt to the State Department, is something that travelers with tax issues need to be aware of. In this blog post, we’ll dive into when and how the IRS can take this action and outline the steps you can take to avoid it.
What Qualifies as Seriously Delinquent Tax Debt?
For the IRS to consider your debt “seriously delinquent,” it must meet specific criteria. Here’s what you need to know:
- Debt Threshold: As of 2024, your tax debt must exceed $62,000 to be considered seriously delinquent. This amount is adjusted annually for inflation.
- Personal Liability: The debt must be one for which you’re personally liable. This typically includes individual income taxes or certain business-related liabilities, such as the trust fund recovery penalty.
- IRS Lien: The IRS must file a lien against your property in connection with this debt.
If your debt meets these criteria, the IRS can certify it as seriously delinquent, which means they can inform the State Department to revoke or deny your passport application.
Exceptions: When the IRS Won’t Certify Your Debt
Even if your debt meets the above criteria, there are several situations where the IRS won’t certify it as seriously delinquent. Generally, this happens when you are actively working with the IRS on resolving your debt or have extenuating circumstances. Here are the most common scenarios where you’re protected:
- Installment Agreements: If you have a pending or approved payment plan in place, the IRS won’t pursue certification of your passport.
- Offer in Compromise: If you’re negotiating an Offer in Compromise or have an offer accepted, your passport remains safe.
- Collection Due Process Hearing (CDP): If you’re challenging the debt through a CDP hearing, the IRS won’t certify your debt during this process.
- Currently Not Collectible Status: If the IRS has deemed you “currently not collectible,” which means you’re unable to pay, your passport isn’t at risk.
- Special Circumstances: Certain situations, such as being in a declared disaster area, bankruptcy, or military deployment, also protect your passport from certification.
Key Takeaway: Avoid Certification by Being Proactive
If you have a tax debt that could be considered seriously delinquent, it’s critical to take action. Contact a tax professional as soon as possible to discuss your options and arrange a payment plan or another form of resolution. This proactive approach can prevent the IRS from considering your debt for certification and protect your passport status.
What to Do If Your Debt is Certified
If your debt is certified as seriously delinquent, you will receive a letter from the IRS. This notice generally provides a 30-day window before the State Department takes action to revoke your passport. During this period, you still have a chance to resolve the issue. However, it’s better not to wait until this point, as you risk losing your passport and facing travel restrictions.
Don’t Let Tax Debt Impact Your Travel
If you rely on your passport for travel, particularly for work or important family commitments, there are ways to expedite the resolution process. However, it’s essential to engage with a tax professional who can work directly with the IRS on your behalf.
To summarize, if you have any tax debt, it’s best to address it promptly through a payment arrangement, an Offer in Compromise, or by challenging the debt. Taking action now can help keep your passport secure and prevent unwanted travel disruptions.
If you have questions about protecting your passport or managing tax debt, reach out today!