Big Tax Debt Can Cost You a Passport

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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.