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Of travel restrictions and back taxes

| Feb 17, 2017 | Internal Revenue Service

Travel bans have been in the headlines and certain nationals are seeing their access to the country imperiled. While that ban is on hold pending legal appeals, U.S. citizens may soon find their passports revoked or limited.

The proposal that tied travel to tax collection was a part of the 2015 Fixing America’s Surface Transportation (FAST) Act. In our April post last year, we wrote about the details. But it was unclear when the new law would go into effect. Now, the IRS has announced plans to start sending certification letters to the State Department as early as March.

“Revocation or denial of passport in case of certain unpaid debt”

The process will have several steps that the IRS recently detailed. First, the IRS will certify a taxpayer has serious delinquent tax debt. This is debt over $50,000 when there are no efforts to make a payment or resolve the situation, such as a:

  • Current installment agreement
  • Offer in compromise
  • Pending collection due process hearing
  • Request for innocent spouse relief

In the second step, the IRS mails a letter to you – CP 508C – notifying you that your delinquent tax debt is being certified to the State Department. Another form letter CP 508R would issue if the certification is reversed after you make a full payment or enter a payment alternative with the IRS.

90-day hold

While the IRS doesn’t provide any grace period to resolve the situation, the State Department will allow 90 days before it takes any action on an application (but not when it comes to revocation of a passport). During this time you would be able to bring up erroneous certification issues, make a payment or enter an installment agreement.

As the final step in the process, the Secretary of State could:

  • Deny your passport application
  • Limited you passport to only allow return travel to the U.S. – this may take place before a full revocation
  • Revoke your passport

It’s important to note that even after you resolve the tax problem with the IRS, it will take at least 30 days for IRS to reverse the certification. How long it takes the State Department to act to reinstate a passport is unclear.

You could appeal the certification in U.S. Tax Court or a U.S. District Court, but this might not avoid the detrimental impact on your passport.

If your employment or a wide-spread family require you to frequently travel between countries, you need to act quickly to deal with outstanding tax debt. Because each situation is different, work with an experienced tax attorney to find a tailored solution that will limit the possible restrictions on your travel schedule.

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