Passport Actions Under Section 7345

The Internal Revenue Service issued new guidance for handling passport actions related to tax debts this month. In 2015, the Fixing America’s Surface Transportation Act was passed, and it ruled that the State Department must deny a passport to anyone with a seriously delinquent tax debt, as well as to revoke the passport of anyone with such a debt.

The IRS said that there has been confused about how to handle these cases considering that it has given rise to a new area of litigation, so it issued guidance in Notice CC-2018- 005.

Tax Debt Parameters

What some would consider “seriously delinquent,” others would consider weekend spending money. So it’s important to define the term as it applies to the passport revocation rules. Section 7345 of the IRS Code says that a seriously delinquent tax debt is any unpaid debt that is more than $50,000. This amount applies to tax debt only, not to criminal restitution or FBAR penalties. The amount does include the interest and penalties on the overdue tax.

The IRS must have filed a notice of a tax lien against the individual, or it must have made a levy. The parameters apply to federal tax only, not to state or local taxes.

Exceptions

The IRS recognizes two exceptions to these guidelines. The first is that the taxpayer is making payments toward the debt under an approved plan. The second exception is if the taxpayer has reached an agreement with the IRS to suspend collection, such as for innocent spouse relief, or if they have requested a hearing for suspension.

It is important to note that taxpayers may get a passport if they meet these exceptions, but that the passport may be revoked at a later time if they no longer meet the criteria. For example, a taxpayer who is making payments toward a tax debt may get the passport, but if the person stops making payments, they may have the passport revoked.

Action will be postponed for those who are serving in a combat zone or contingency operation. Those who are abroad will be allowed to return home before having the passport revoked.

Challenges

The State Department will rely on a list of taxpayers who have been certified to have seriously delinquent tax debts to know who should have a passport revoked or denied. The certification can only be reversed if the debt is fully paid, the debt ceases to be considered seriously delinquent because of an exception, or if the certification is found to be incorrect.

Taxpayers who are unable to get a passport because of this law can work with a tax lawyer in Las Vegas to challenge the certification and show that it was made in error. The IRS has said it expects challenges to the tax amount owed, the period allowed for brining an action, and the process for certification.

Taxpayers have six years to bring a challenge to the certification, so that gives most people plenty of time to work with a tax attorney and to develop a legal strategy to reverse the decision. For some, having a passport revoked may be little more than an inconvenience when the family wants to travel. For others, not having a passport could affect their livelihood since they have to travel for business. Working with a tax law lawyer to challenge the certification or negotiate a settlement for the tax debt can help get these people traveling again quickly.

It is important that anyone who needs to challenge a certification under this law work with an experienced Las Vegas tax lawyer. Since the law is relatively new, attorneys will have to rely on extensive knowledge of the tax code and a history of similar rulings to apply the law.

The attorneys at Silver Law PLC in Arizona and Nevada have all worked for the IRS in the past, and they have years of experience representing taxpayers like yourself. They will explore every opportunity for challenging a certification if you are unable to get a passport, including challenging the debt itself or negotiating a reduction. Your previous returns could be audited to find additional credits and deductions or errors.

Our Arizona tax attorneys and Las Vegas IRS tax audit lawyers can also negotiate a re-payment plan for you, which would help you come into compliance and get your passport. Your tax attorney may also help you to get innocent spouse relief or some other exception, depending on the circumstances of your case. Call us in Arizona today to talk with an experienced tax law lawyer who can help you understand your legal rights and options.

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