The IRS will soon start certifying seriously delinquent taxpayers to the State Department. Letters will start going out in March. Then, the State Department can take action to deny a passport application/renewal or revoke/limit existing passports.
In our February post from last year, we described the new enforcement tool. How can you avoid losing your passport?
Tax debt that meets certain criteria will not be considered by the IRS when it makes determinations of serious delinquent tax debt ($50,000):
- Timely payments through an installment agreement with the IRS
- Payments as part of an accepted offer in compromise
- A pending collection due process hearing
Acting quickly to deal with the debt will be imperative if you travel frequently for business or family interests.
The first and probably fastest way to deal with the situation is to pay down the debt to under $50,000 and apply online to enter an installment agreement. You can extend the payment period out to 72 months and even schedule direct debits.
If you owe significantly more, a new IRS program that started last year could still offer help. It offers relief to taxpayers who owe between $50,000 and $100,000. The program extends the repayment terms out to 84 months. It also does not require you to submit financial condition documentation.
Offer in compromise (OIC) situations
When circumstances have changed to the extent that you will never be able to repay the tax debt, think about submitting an OIC application. Because the IRS generally accepts fewer than half, it is important to meet with a tax attorney before going this route.
It will often take several months to get a decision from the IRS. This may not yet be a viable solution, if immediate travel plans could be impacted by a revocation or limitation on your passport.
There is no time to waste. When tax debt surpasses $50,000, you need to act or your passport could be in jeopardy.