January 30, 2018 9:52 pm

Big Tax Debt Can Cost You a Passport

Under the Fixing America’s Surface Transportation (FAST) Act, the federal government has the authority to revoke or refuse to issue or renew a passport to an individual with seriously delinquent tax debts. Seriously delinquent means tax due of more than $51,000 in back taxes, interest, and penalties if the taxpayer has not entered into a payment agreement with the IRS and the IRS has either filed a Notice of Federal Lien for which the time to challenge has expired or it has issued a levy. (For someone with a seriously delinquent tax debt who is in a combat zone, the passport isn’t at risk during this period.) Here’s how this works:

The IRS notifies the U.S. State Department that an individual has a seriously delinquent tax debt (Notice 2018-1). Then the State Department can revoke an existing passport or deny a passport application or renewal.

A passport isn’t at risk if the individual:

  • Is in bankruptcy
  • Is identified as a victim of tax-related identity theft
  • Has an account with the IRS that has been determined at not collectible due to hardship
  • Is located in a federally-declared disaster area
  • Has a request pending for an installment agreement with the IRS
  • Has a pending offer in compromise with the IRS
  • Has an IRS-accepted adjustment that will satisfy the debt in full

What to do: If you’re facing seriously delinquent tax debt, be proactive in resolving it (IR-2018-7). Consider setting up an installment agreement to pay it off over time or work out an offer in compromise to pay less than the full amount owed.

advertisement
Tax Glossary

Disaster losses

Casualty losses such as from a storm, in areas declared by the President to warrant federal assistance. An election may be made to deduct the loss in the year before the loss or the year of the loss.

More terms