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Owe Federal Taxes You Can't Currently Pay? Need a Passport? Not to Worry

Owe Federal Taxes You Can't Currently Pay? Need a Passport? Not to Worry
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Monday, 09 July 2018 09:17 AM Current | Bio | Archive

In February, 2018 the United States implemented a program of denying passports to Americans owing at least $51,000 in delinquent taxes, or revoking such individuals’ passports. “Delinquent taxes” includes tax, penalties, and interest. The $51,000 threshold is indexed for inflation.

If you have a federal tax balance which you cannot currently pay, and you need a passport, you should do what any taxpayer with delinquent federal taxes should do: You should have competent tax counsel contact the IRS and deal with it. The United States will not deny a passport to, or revoke a passport from, a delinquent taxpayer, provided the taxpayer has endeavored to resolve his or her delinquent taxes by entering into an installment agreement with the IRS, or making an offer in compromise to the IRS.

To enter into an installment agreement with the IRS, you must propose a monthly payment to the IRS. If your proposed monthly payment will not full-pay your delinquent federal tax balance in the remaining period of the collection statute of limitations, you will have to complete a Form 433-F, Collection Information Statement, and submit it to the IRS. If you and the IRS Collection division are unable to agree upon a monthly payment, you can take the matter to the IRS Appeals Office, an independent, quasi-judicial office within the IRS.

An offer in compromise (“OIC”) should be approached with some trepidation. An OIC must be an amount greater than the taxpayer’s current equity in assets, as determined by a Form 433-A (OIC), submitted to the IRS. The making of an OIC suspends the collection statute of limitations on the subject delinquent taxes. The IRS rejects most OICs. If an OIC is rejected, the IRS keeps the required deposit made with it, and the of course taxpayer is out the professional fees incurred in making the offer. OICs are often hawked on TV by ill-qualified “tax resolution” firms, though the making of an offer rarely is in the taxpayer’s best interests. If you are going to make an OIC, you should do so only with the assistance of qualified, experienced tax counsel.

Currently-not-collectible (CNC) posting is a third way of resolving a delinquent federal tax balance. In many ways it is the best way of resolving a delinquent federal tax balance. When a balance is posted as CNC, the taxpayer currently need not pay anything on it, and the collection statute of limitations continues running on it. We don’t know whether the U.S. will refrain from denying or revoking a passport concerning a taxpayer whose balance is posted as CNC; as yet there is no administrative guidance on point.

So, having a delinquent federal tax balance is no threat to your passport, provided you contact the IRS and deal with it.

Stephen J. Dunn is a tax attorney in Troy, Michigan. He is the author of the treatise Foreign Accounts Compliance (Thomson Reuters 2017) and Foreign Accounts Compliance Blog. He is also an adjunct professor at Michigan State University College of Law.

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StephenJDunn
In February, 2018 the United States implemented a program of denying passports to Americans owing at least $51,000 in delinquent taxes, or revoking such individuals’ passports.
owe, federal, taxes, passport
502
2018-17-09
Monday, 09 July 2018 09:17 AM
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