Time to Get Right with the IRS or Lose Your Passport
This boils down to basic math: Lots of unresolved back taxes + international travel plans = no more passport.
Listen up – if you owe back taxes, haven’t set up an arrangement to pay the IRS, and:
- You’re thinking of traveling overseas for business or vacation.
- You need to come back to the United States.
- You need to apply for or renew your passport.
You need to apply for or renew your passport.
Here’s what you need to know
In 2015, Congress passed a law restricting passport holders who have “seriously delinquent tax debt”
After two years of working out the enforcement details, the IRS has started “certifying” seriously delinquent tax debtors. The IRS estimates that about 235,000 taxpayers will be affected.
What’s seriously delinquent tax debt? U.S. passport holders who owe more than $51,000 in back taxes and aren’t in good standing with the IRS.
What does “good standing” mean? Not being in good standing means you haven’t made any arrangements to pay the IRS (like payment plans or other options).
What does it mean to be certified? Basically, once you’re certified as having seriously delinquent tax debt, the U.S. State Department can start restricting your passport until you pay or make arrangements to pay with the IRS.
What will happen if you fall under this program
1. Expect a letter from the IRS.
The IRS says it started sending IRS Letter CP508C in January 2018. This letter will put you on notice that you need to take immediate action to resolve your back taxes with the IRS.
In January 2018, the IRS said that you will have 90 days after the certification notice before the State Department can restrict your passport. But the IRS warns that if you have upcoming international travel plans, you need to act quickly to get your situation resolved.
The faster you act, the more time the IRS has to notify the State Department before it can restrict your passport.
2. You’ll need to pay all your back taxes or make arrangements to pay.
Here are your options:
- Set up a monthly IRS payment plan (called an installment agreement) on your back taxes.
- File a valid offer in compromise to settle back taxes.
- If you’re in a financial hardship situation, establish a deferred payment agreement with the IRS (called currently not collectible status).
- Request innocent spouse relief.
Paying your balance to under $51,000 won’t get you out of trouble. You’ll need to make arrangements to pay all your back taxes.
Also, the list above isn’t all-inclusive. The IRS can always add more categories of people who aren’t subject to passport restrictions.
3. You’ll have to wait until the IRS “decertifies” your tax debt status before you can travel.
The law says the IRS should decertify you within 30 days after you’re back in good standing. But, two issues may cause delays for some people:
Delay 1: You also have back tax returns to file. If you want to set up a payment plan or other agreement with the IRS, you’ll have to be “filing compliant.” That means you’ve filed all your required returns, typically for at least the past six years. For people with back tax returns and back taxes, fixing this situation could take months.
Delay 2: You need an alternative payment arrangement. IRS payment agreements that aren’t “streamlined” can take some legwork, especially if you:
- Owe more than $100,000
- Need to work out payment terms with the IRS based on your finances
If you need payment terms with the IRS, you’ll have to disclose the details of your financial situation (usually with IRS Forms 433). Learn about payment arrangements. This kind of arrangement can take months for the IRS to approve.
Taxpayers who find themselves with passport restrictions and need to travel won’t have a fast track to remove these restrictions. That’s why it’s important to act as soon as possible.
Passport restrictions are here to stay
Passport restrictions are law, and the IRS has now put procedures in place to continuously enforce the program.
This means that if you find yourself with seriously delinquent tax debt in the future, you can expect the IRS to start the process with the State Department to restrict your passport. This new IRS enforcement tool to collect back taxes is here unless Congress changes the law.
Time to get in good standing
People who receive IRS Letter CP508C, or anyone who owes the IRS, should get into good standing with the IRS as soon as possible. The faster you act, the faster your issue is resolved at the IRS – and the less you’ll owe in penalties and interest.
Take these five steps:
- Start by filing all your returns.
- Make sure the taxes you owe are correct. This may mean contesting tax assessments that the IRS made in an audit, or addressing penalties the IRS says you owe.
- Get into a payment agreement or other collection alternative with the IRS.
- Confirm that you aren’t a certified seriously delinquent tax debtor, and
- Enjoy your travel.
An experienced tax professional can help you get into filing and payment compliance with the IRS. Learn about H&R Block’s Tax Audit & Notice Services. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504 or finding a local tax pro.
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