IRC Section 7345: “Revocation or Denial of Passport in case of Certain Tax Delinquencies” was added to the Internal Revenue Code about a year ago (December 2015). This law gives the IRS the ability to certify taxpayers that owe: seriously delinquent tax debt*. Once certified, the IRS will transmit a certificate to the Secretary of State that will have the effect of revoking the taxpayer’s passport.
*Seriously delinquent tax debt – refers to unpaid legally enforceable federal tax liability of $50,000 or greater (including interest and penalties) and the taxpayer received a federal tax lien or levy notice.
Even if the taxpayer owes $50,000 or more in outstanding federal tax liability their passport may still be safe under these circumstances:
- Taxpayer is timely paying their tax liability under an Installment Agreement
- Taxpayer is paying their tax liability through an Offer in Compromise
- Taxpayer has Collection Due Process (CDP) rights or requested a CDP hearing
- Taxpayer is claiming innocent spouse relief with regards to the outstanding tax liability
I see Section 7345 as an effective tool to get taxpayers with outstanding tax liabilities to enter into Installment Payment Agreements. Similarly, New York State has been very successful in collecting unpaid taxes by suspending driver licenses of taxpayers that owe $10,000 or more in back taxes. I am confident in saying the Passport & NYS Driver’s License Suspension Program are here to stay. Why? Because they are extremely effective.
Disclaimer: This article is offered for general information and educational purposes and not intended to be tax or legal advice.
Peter Alizio is a CPA and Tax Attorney. When he is not solving IRS and NYS tax problems he likes football and playing amateur chef. He also enjoys meeting new people, preferably over coffee, whiskey or cigars.