What You Need to Know About Overseas Travel and Delinquent Taxes
Summer time is around the corner and many Americans plan to travel overseas.
Who would not like to travel to Tuscany, Italy where images of Renaissance art and architecture, terraced hills, neatly planted inn vines and olive trees, Montessori’s and villas surrounded by woods and enclosed gardens all come to mind.
Or maybe a romantic gateway to beautiful Paris.
How Delinquent Tax Debt Could Ruin Your Overseas Travel Plans
Before you start packing make sure you don’t have any seriously delinquent debt to the IRS.
In a transportation bill signed by President Obama back in December, there is a provision requiring the IRS to refer seriously delinquent taxpayers to the U.S. State Department for denial or revocation of a passport.
To qualify as seriously delinquent, the taxpayer must owe the IRS over $50,000 including assessed taxes, interest, and penalties.
Second, a notice of a lien must have been filed and all administrative appeal rights exhausted or lapsed, or a notice of a levy filed.
When sending the certification to the State Department, the IRS must provide contemporaneous notice to the taxpayer.
Upon receipt of the certification from the IRS, the State Department is prohibited from issuing the seriously delinquent taxpayer a passport except for emergency or humanitarian reasons.
The State Department may even revoke a previously issued passport.
If the taxpayer is already out of the country, the State Department must either limit the previously issued passport to return travel to the United States or issue a limited passport that permits travel only to the United States.
Settling Delinquent Tax Debt
If taxpayers satisfy their debt in full or it is no longer legally enforceable the IRS must notify the State Department and the restriction must be lifted.
When doing so, the IRS must send contemporaneous notice to the taxpayer as well.
Additionally, if the taxpayer enters into an installment agreement with the IRS, the IRS accepts the taxpayer's offer in compromise or the taxpayer requests innocent spouse relief, the IRS must notify the State Department to withdraw the certification.
Paying the balance down from $50,000 after the certification had been issued will not be a valid reason for the IRS to withdraw the certification.
If you had any notices of intent to file a lien or to levy issued prior to Dec 4, 2015 it should not cause you to qualify as seriously delinquent.
How to Avoid Passport Denial Due to Delinquent Taxes
So what do you need to do in order to assure uninterrupted use of your passport?
Stay current with your tax obligations. If you fall behind in IRS payments make sure not to cross the $50,000 mark.
In case you did cross the $50,000 mark, you can prevent the certification by entering into an installment agreement or have the IRS accept your offer in compromise (although accepting the OIC can take up to a year).
Finally, a request for innocent spouse relief will prevent certification of the requesting spouse and, if already certified, will require the IRS to decertify the taxpayer's delinquency status.
Now what? Go plan that vacation, enjoy your summer and if you need a friend to help fight the IRS let us know.
OTA Tax Pros can help you settle with the IRS and allow you to spend your time planning and enjoying your summer vacation.