In late 2015, Congress passed the Fixing America’s Surface Transportation Act (also known as the FAST Act), designed to “authorize funds for Federal-aid highways, highway safety programs, and transit programs”. It’s a 305 billion dollar, five-year bill, and most Americans won’t have to pay for it. Instead, funds will be raised through new regulations, effective as of March 2017, revoking the passports of delinquent taxpayers. At Polston Tax, we’re always here for our clients, even when they find themselves in a pickle because of what the FAST Act calls “seriously delinquent tax debt”. In today’s Rod’s Blog, we’re going to take a look at the new rules regarding passport restriction, and strategies you might need to get your passport back.
The program is explicitly laid out under IRC 7345 of the FAST Act, which defines “seriously delinquent” debt as debt that has: Been assessed, is greater than $50,000, and with a lien and levy filed, assuming all attempts at relief have been exhausted. The good news is that those who owe a smaller sum shouldn’t be affected. But if you happen to meet the IRS’s criteria, your passport will be revoked.
Revoking a taxpayer’s passport is a worst-case scenario, and the IRS will send plenty of warning beforehand. Seriously delinquent taxpayers will receive a notice, Letter 508C in the mail (or to the taxpayer’s last known address). At the same time, the IRS will send a second copy of the notice to the State Department. If the taxpayer fails to respond as per the instructions on the notice, then their passport will be revoked.
Of course, delinquent taxpayers will be unable to leave the United States, and the State Department will decline any passport applications or renewals. The protocol is still unclear about what happens to a delinquent taxpayer outside the US, but proposed rules may limit their passport, to force them to return stateside.
If you’re a delinquent taxpayer and your passport has been revoked, there is only one course of action — get back “in good standing” with the IRS. This doesn’t necessarily mean paying your entire debt at once, simply initiating a payment plan with the IRS is typically enough to lift the restrictions. However, the agreement must account for 100% of back taxes. Once you’re back in good standing with the IRS, they will notify the State Department within 30 days to lift restrictions.
If you happen to owe more than $50,000, or even more than $100,000, then you must fill out detailed collection information statements (also known as the Form 433 Series), and enter into a special agreement with the IRS. This process is lengthy and can take months, but passport restrictions will remain in place for the entire process.
There are exceptions to the process, but they rarely work: The State Department can issue a passport in emergencies for humanitarian reasons, if there is a pending offer-in-compromise or Justice Department agreement, if a levy is currently under appeal, or lastly, in an innocent spouse relief case (for which you would have to fill out Form 8857). Again, these exceptions don’t work all that often, and the best way to lift restrictions is to pay your debt and get back in good standing with the IRS.
If you think that you might be subject to passport restrictions because of delinquent taxes, you can call the National Passport Information Center (877-487-2778), or the IRS to set up a payment plan (domestic calls: 855-519-4965, international calls: 267-941-1004).
Or you can call us here at Polston Tax. Our expert staff will give you the advice you need to put you back in the IRS’s good graces. Be sure to browse our services page and fill out a form for a free consultation. Or give us a call at 844-841-9857. We’re open 8am – 5pm Central!