Tax Delinquency and Passport Status

Chad Silver

Chad Silver

Managing Partner of Silver Tax Group, author of the book "Stop the IRS". Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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Despite claims of IRS reform, there are no signs that there will be less enforcement concerning IRS regulations. In fact, the IRS appears to be paying attention to regulations that just a few years ago they did not aggressively enforce.

One particular section concerns passports. Under IRC section 7345, the IRS has the power to revoke passports or deny passport applications. This occurs following a certification by the IRS to the State Department that the taxpayer has a “seriously delinquent tax debt.”

Background on IRC section 7345

Enacted in 2015, there was no enforcement of IRC section 7345 prior to 2018. Before that time, there were still issues concerning interpretation and processes for enforcement of this section.

Yet on January 16, the IRS released a notice that was to provide guidance concerning the IRS exercise of discretion (along with enactment with the State Department) concerning enforcement. Most importantly, the penalties under this section are stringent. With the intent to enforce this section, Michigan taxpayers with back taxes owed can anticipate facing these penalties.

IRC section 7345 labels individuals as seriously delinquent with tax liabilities in excess of $50,000. However, this is not a hard and fast rule.

The IRS does not consider it a seriously delinquent debt if the taxpayer is timely in paying off its debt through an installment plan with the IRS, or a settlement agreement with the justice department. The same is true if the taxpayer is paying off their debt through an offer in compromise.

If there is a levy in connection with the debt, a request for a due process hearing can suspend collection efforts. Suspension of collection efforts will also take place for innocent spouse requests or election considerations.

The IRS can act at any time

Once the IRS certifies a taxpayer as seriously delinquent, they can act at any time. However, this creates issues for taxpayers as they may not have notice to challenge such a certification.

Whether it concerns a seizure of a passport, a wage garnishment or levy, or any other penalty the IRS may propose, it’s important to understand your rights as a taxpayer. Attorneys, who understand tax law, also understand what your options are when it comes to contesting a seizure of assets or property. You have a right to legal representation when in such matters. A tax law professional can carefully examine your situation and provide the legal guidance you need.

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