Can The IRS Revoke My Passport?

Don’t want to pay your taxes ehh? We’ll get your attention!

So the short answer to the question is yes, the IRS can revoke your passport if you have a “seriously delinquent” tax debt.  But what exactly does that mean?  More importantly, what can you do if your passport is at risk of being revoked?  Read on to learn more my friend!

Background
On December 4, 2015, President Obama signed the Fixing America’s Surface Transportation (FAST) Act (Pub. L. No. 114-94) into law—the first federal law in over a decade to provide long-term funding certainty for surface transportation infrastructure planning and investment.  But like all legislative bills/acts, other things that may appear unrelated often get inserted into them.  This act was no different.

Internal Revenue Code Sec. 7345 was enacted as part of the FAST Act.  A seriously delinquent tax debt is defined as an unpaid, legally enforceable, and assessed federal tax liability greater than $51,000 (adjusted annually for inflation) and for which:

  • The IRS has filed a notice of federal tax lien and the individual’s right to a hearing has been exhausted or lapsed, or
  • The IRS has issued a levy.

Generally speaking a federal tax debt is the sum of all current tax obligations, including penalties and interest.  However, a “seriously delinquent tax debt” does not include any of the following tax debt even if it meets the criteria stated above:

  • Being paid timely with an IRS-approved installment agreement (IA),
  • Being paid timely with an offer in compromise (OIC) accepted by the IRS, or a settlement agreement entered with the Justice Department,
  • For which a collection due process hearing is timely requested regarding a levy to collect the debt,
  • For which collection has been suspended because a request for innocent spouse relief under IRC § 6015 has been made

Furthermore, a passport won’t be at risk under this program for any taxpayer:

  • Who is in bankruptcy
  • Who is identified by the IRS as a victim of tax-related identity theft
  • Whose account the IRS has determined is currently not collectible (CNC) due to hardship
  • Who is located within a federally declared disaster area
  • Who has a request pending with the IRS for an installment agreement (IA)
  • Who has a pending offer in compromise (OIC) with the IRS
  • Who has an IRS accepted adjustment that will satisfy the debt in full

What the IRS does when you have a seriously delinquent tax debt
The IRS is required to notify you in writing at the time the IRS certifies seriously delinquent tax debt to the State Department. This is done via IRS notice CP 508C.  If you have been certified to the Department of State by the Secretary of the Treasury as having a seriously delinquent tax debt, you cannot be issued a U.S. passport and your current U.S. passport may be revoked.

How do you resolve the situation?
The IRS will reverse a certification when the tax debt no longer qualifies as a seriously delinquent tax debt.  This happens when:

    • The tax debt is fully satisfied or becomes legally unenforceable.
    • The tax debt is no longer seriously delinquent meaning:
      1. You and the IRS enter into an installment agreement allowing you to pay the debt over time.
      2. The IRS accepts an offer in compromise to satisfy the debt.
      3. The Justice Department enters into a settlement agreement to satisfy the debt.
      4. Collection is suspended because you request innocent spouse relief under IRC § 6015.
      5. You make a timely request for a collection due process hearing regarding a levy to collect the debt.
    • The certification is erroneous.

The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practicable.

The IRS will not reverse certification where a taxpayer requests a collection due process hearing or innocent spouse relief on a debt that is not the basis of the certification.  Also, the IRS will not reverse the certification because the taxpayer pays the debt below $50,000.  So…if you have been notified that your tax debt has been certified, you should consider:

  1. paying the tax owed in full,
  2. entering into an installment agreement, or
  3. making an offer in compromise.

But what if the IRS made an error?
The State Department is held harmless in these matters and cannot be sued for any erroneous notification or failed decertification under IRC § 7345.  If you believe that the IRS certified your debt to the State Department in error, you can file suit in the U.S. Tax Court or a U.S. District Court to have the court determine whether the certification is erroneous or the IRS failed to reverse the certification when it was required to do so. If the court determines the certification is erroneous or should be reversed, it can order the IRS to notify the State Department that the certification was in error.

Can I contact the State Department to find out the status of my passport?
The State Department does not have any information about your seriously delinquent tax debt. For questions, or to resolve your seriously delinquent tax debt, they recommend that you contact the IRS via phone at 1-855-519-4965 (1-267-941-1004 international) of via mail at:

Department of the Treasury
Internal Revenue Service
Attn: Passport
PO Box 8208
Philadelphia, PA 19101-8208

How can we help?
As you can tell from above, the IRS will only really reverse the certification if the debt is no longer enforceable (i.e. collectable) or if you enter into a resolution option (i.e. payment plan, currently not collectible, etc).

With regards to enforceability, the IRS only has 10 years from the date of assessment to collect on unpaid taxes.  If you are getting letters, your debt is more than likely still active.  But do you know when it will expire?  This is called the CSED date.

While you could go through the hassle of calculating your CSED (see this blog post), do you really want to?  For a flat $75 fee, and us filing a few forms with the IRS (with your consent), we’ll look at however many years you want to analyze, and provide you with a comprehensive report that will include:

  • Total tax assessment, penalty, interest and accrual amounts for each year (so you know how much you really owe)
  • CSED calculations for each year requested (i.e. when your debt will expire)
  • Tolling events (if any) and the days your CSED has been extended
  • All IRS notices sent/received for each year
  • IRS account activity by year
  • And much, much more (we promise)

If your debt will not expire for some time, we are fully authorized to represent your before the IRS and can can help negotiate a resolution option (i.e. IA, OIC, CNC) that will satisfy the IRS conditions to have your certification revoked/lifted.  You can learn more about our representation services by visiting the IRS Debt Representation page or reading the IRS Talk post within our blog.

When you are ready to get started, simply call us at (773) 239-8850 or click our email address at the bottom of this screen.

New Book – How To Slash Your Taxes!

Filled with 111 proven topics to help you slash your tax bill!

Let’s face it, no one likes to pay more in taxes than they should.  In our office, we typically tell taxpayers that they should aim to be within +/- $1,000 with regards to their refund or having a balance due.  A balance due of $1,000 while not pleasant, is manageable for most people when it comes to paying it outright or setting up a payment plan.  Getting a refund of $1,000 or less you means that you didn’t give Uncle Sam too much of an interest free loan for a year.  Hey, it’s not called a “refund” for no reason; it’s your own money they are giving you back!

But what happens when people (i.e. taxpayers or tax preparers) push the limits to cut a tax bill?  Well, since we deal with the consequences fairly often, let’s just say that it’s usually not good.  Furthermore, it’s totally unnecessary and who has the time to keep looking over their shoulder wondering if the big, bad IRS is going to come knocking?

The point of this book is to show you that there are hundreds of ways that you can achieve tax savings while doing it both legally and ethically.  This is largely due to the complexities of the Internal Revenue Code (IRC) and all of the loopholes that have been incorporated into it over time.  This book highlights 111 topics that can help you capitalize on this fact and in turn slash your tax liability.

So no matter if you are a parent, homeowner, investor, landlord, retiree or business owner, this book has something for everyone!  Check out the video below to hear more and look below the video on ways that you can place an order.

You can also view this video on our YouTube Channel here.

How To Order Your Copy

Order directly from our office.  You can order via credit card by clicking the “Buy Now” button below.  If you select the “autographed with my custom message” option, you will be contacted post order to obtain your message.  Please note that payment processing is performed via PayPal and if you do not have an account, you can simply select the option to pay with credit or debit card at the bottom.  All orders processed via this method include Illinois sales tax as well as priority shipping via USPS.

Don’t have a credit card or simply want to pay via check?  Then please complete this HTSYTLE Order Form and return it to our office.


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Order via Amazon.  If you do not want an autographed copy, or do not want to order via our office, you can order your copy via Amazon.  Simply visit the author page for Jared R. Rogers, CPA  and complete your order that way.  You will have the choice of ordering either the paperback or Kindle edition.

How Will The New Tax Law Affect Me?

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law.  It has been touted as one of the most significant overhauls to the Internal Revenue Code since the Tax Reform Act of 1986.  The new law reduces tax rates for corporations and individuals, while repealing many deductions taxpayers were accustomed to, in an attempt to “simplify” the filing of their tax returns.  This post will focus on the changes that will impact individuals.  We’ll follow it up with another that focuses on the changes for business entities at a later date.

One of the most important things to note about the changes outlined below is that many go into effect for tax years ending after January 1, 2018.  As such, most of this will not apply when you file your 2017 tax return during the 2018 filing season (i.e. the ones due 4/17/18).  With that said, under each section you will find a “planning” comment to aid you in preparing for how it may impact the tax return you file in early 2019.

Tax Brackets and Tax Rates
The new law retains the seven tax brackets that previously existed, however, the rates are now 10%, 12%, 22%, 24%, 32%, 35% and 37%. Shown below are how the brackets and rates are applied to each filing status:

Single

Taxable Income Between:Tax Due:
$0 - $9,525$0 plus 10%
$9,526 - $38,700$952.50 plus 12% of the amount over $9,525
$38,701 to $82,500$4,453.50 plus 22% of the amount over $38,700
$82,501 to $157,500$14,089.50 plus 24% of the amount over $82,500
$157,501 to $200,000$32,089.50 plus 32% of the amount over $157,500
$200,001 to $500,000$45,689.50 plus 35% of the amount over $200,000
Above $500,000$150,689.50 plus 37% of the amount over $500,000

Head of Household

Taxable Income Between:Tax Due:
$0 to $13,600$0 plus 10%
$13,601 to $51,800$1,360 plus 12% of the amount over $13,600
$51,801 to $82,500$5,944 plus 22% of the amount over $51,800
$82,501 to $157,500$12,698 plus 24% of the amount over $82,500
$157,501 to $200,000$30,698 plus 32% of the amount over $157,500
$200,001 to $500,000$44,298 plus 35% of the amount over $200,000
Above $500,000$149,298 plus 37% of the amount over $500,000

Married Filing Jointly and Qualifying Widow(er)

Taxable Income Between:Tax Due:
$0 to $19,050$0 plus 10%
$19,051 to $77,400$1,905 plus 12% of the amount over $19,050
$77,401 to $165,000$8,907 plus 22% of the amount over $77,400
$165,001 to $315,000$28,179 plus 24% of the amount over $165,000
$315,001 to $400,000$64,179 plus 32% of the amount over $315,000
$400,001 to $600,000$91,379 plus 35% of the amount over $400,000
Above $600,000$161,379 plus 37% of the amount over $600,000

Married Filing Seperately

Taxable Income Between:Tax Due:
$0 to $9,525$0 plus 10%
$9,526 to $38,700$952.50 plus 12% of the amount over $9,525
$38,701 to $82,500$4,453.50 plus 22% of the amount over $38,700
$82,501 to $157,500$14,089.50 plus 24% of the amount over $82,500
$157,501 to $200,000$32,089.50 plus 32% of the amount over $157,000
$200,001 to $300,000$45,689.50 plus 35% of the amount over $200,000
Above $300,001$80,689.50 plus 37% of the amount over $300,000

Standard Deduction
The new law doubled the amount of the previous standard deduction to the following amounts:

Standard Deduction

Filing StatusAmount
Single$12,000
Head of Household$18,000
Married Filing Jointly$24,000
Married Filing Separately$12,000
Additional amount if over age 65 or blind$1,600 – Unmarried individuals
$1,300 – Each spouse meeting criterion

Planning Comment: If you previously  itemized, you may no longer need to due to these increased amounts.  Remember, the IRS lets you take the standard or itemized deduction, whichever is greater.  With that being said,if your itemized deductions (discussed below) do not exceed these amounts, your tax filing just “theoretically” became more simple.

Personal Exemptions
The personal exemption has been repealed and will not be available after tax year 2017.

Planning Comment: If you have a large family and moderate income, this change might hurt you.  Because you will no longer receive an exemption for every member of your household listed on your return (which lowers your taxes), you could see your tax bill increase.

The Alternative Minimum Tax (AMT)
The phaseout thresholds have been increased to $1,000,000 for those filing as married filing joint, and $500,000 for all other taxpayers (other than estates and trusts). These amounts are indexed for inflation.

Alternative Minimum Tax (AMT) Exemptions

Filing StatusExemption Amount
Single$70,300
Married Filing Jointly and Surviving Spouses$109,400
Married Filing Seperately$54,700

Itemized Deductions
With the exception of the items outlined below, all other itemized deductions are repealed. The overall limitation on itemized deductions for upper income individuals is also repealed.

  • Medical Expenses:  For 2017 through 2018, expenses exceeding 7.5% of income are deductible.  This percentage increases to 10% in 2019.
  • State and Local Taxes (SALT): Taxpayers can claim up to a $10,000 deduction for a combination of state and local income tax, sales tax, or real estate taxes.  Foreign real property taxes are no longer deductible.
  • Mortgage Interest:  The deduction for mortgage interest is capped at $750,000 of debt, but is still allowed on a first or second home.  The interest on home equity loans will no longer be deductible.  Interest on up to $1 million of acquisition debt for loans entered into prior to December 15, 2017 is grandfathered and still deductible.
  • Charitable Contributions: Taxpayers who are able to itemize deductions can still include charitable contributions. The current limitation to 50% of income is increased to 60%.
  • Casualty Losses: Deductions for unexpected losses to personal property are no longer deductible unless covered by specific federal disaster declaration.
  • Wagering Losses: The meaning of losses from wagering transactions (i.e. gambling) is clarified to include other expenses incurred by the individual in connection with the conduct of that individual’s gambling activity (e.g. travel expenses to or from a casino).

Planning Comment: There are two big changes/challenges in this area.  First, since the SALT deduction is capped at $10,000, that means that you have to close a gap of anywhere between $2,000 – $14,000 to keep itemizing depending on your filing status.  As such, we suspect that single homeowners may still find themselves itemizing, but those filing as married filing joint may not (unless they pay a significant amount of mortgage interest).

The second area revolves around the removal of the items that were subject to a 2% floor of your income.  So, if you previously deducted any of the items listed below, know that you will not be able to claim them after filing your 2017 tax return:

  • work-related travel, transportation, meal, and entertainment expenses
  • depreciation on a computer or cellular telephone your employer requires you to use in your work
  • dues to a chamber of commerce (or professional societies) if membership helps you do your job
  • education (work-related)
  • home office expenses for part of your home used regularly and exclusively in your work
  • legal fees
  • subscriptions to professional journals and trade magazines related to your work
  • tools and supplies used in your work
  • union dues and expenses
  • work clothes and uniforms (if required and not suitable for everyday use)
  • tax preparation fees

Child Tax Credit
The child tax credit will increase to $2,000 per qualifying child and will be refundable up to $1,400 (subject to phaseouts).   Phaseouts, which are not indexed for inflation, will begin with adjusted gross income of more than $400,000 for those filing as married filing jointly or $200,000 for all other taxpayers.

Non-Child Dependent Credit
A new $500 non-refundable credit covers dependents who don’t qualify for the child tax credit, such as children who are age 17 and above or dependents with other relationships (such as elderly parents). You can’t claim the credit for yourself (or your spouse under married filing jointly status).

Kiddie Tax
The kiddie tax applies to unearned income for children under the age of 19 and college students under the age of 24. Unearned income is income from sources other than wages. Taxable income attributable to net unearned income will be taxed according to the brackets applicable to trusts and estates. The rules for tax applicable to earned income are unchanged.

Student Loan Interest Deduction
For 2018, the maximum amount that you can deduct for interest paid on student loans remains at $2,500. Phaseouts apply for taxpayers with modified adjusted gross income (MAGI) in excess of $65,000 ($135,000 for joint returns) and is completely phased out for taxpayers with modified adjusted gross income (MAGI) of $80,000 or more ($165,000 or more for joint returns).

Section 529 Plans
Distributions of up to $10,000 per beneficiary can be used for tuition expenses for public, private or religious elementary or secondary school. The limitation applies on a per student basis rather a per account basis. Distributions can also be made for expenses related to homeschool.

Discharged of Student Loan Indebtedness
The exclusion from income resulting from the discharge of student loan debt is expanded to include discharges resulting from death or disability of the student.

Educator Expenses
The bill retains the present law above-the-line deduction of $250 (indexed for inflation) for out-of-pocket expenses.

Bicycle Commuting Reimbursement
The exclusion from gross income and wages for qualified bicycle commuting reimbursements up to $20 is suspended.

Moving Expense Deduction
Moving expenses related to a job change are no longer deductible except for active members of the military.

Alimony
Beginning with divorces in 2019, alimony payments to an ex-spouse are no longer deductible and not taxable to the recipient.

Affordable Care Act
The penalty for failing to maintain minimum essential coverage for individuals (individual mandate) is repealed beginning in 2019.

Estate Tax Exemption
The estate and gift tax exemption is doubled for estates of decedents dying and gifts made after December 31, 2017, and before January 1, 2026.  The exemption increases to $11,200,000 in 2018. The generation skipping transfer (GST) tax exemption is also doubled.