The IRS can order the State Department to cancel your passport if you owe over $50,000 in back taxes and you have not made an installment agreement or other arrangement with the IRS. Section 7345
of the tax code broadly empowers it, and the IRS has details on its website
. If you have a seriously delinquent tax debt, IRS can notify the State Department. Then, the State Department generally will not issue or renew your passport. This only applies to a seriously delinquent tax debt, more than $50,000. So staying below this figure is best if you can. But that includes penalties and interest. A $20,000 tax debt can grow to $50,000 including penalties and interest. So if you can, try to keep a proposed tax bill from actually becoming a tax debt.
The IRS usually sends multiple notices, and you should respond. Explain why the IRS is incorrect, and keep protesting. If you receive an IRS Notice of Proposed Deficiency or Examination Report, prepare a protest before the deadline. Normally a protest will land you in the IRS Appeals Office, where you have another chance to resolve it. Eventually, if you fail to protest, or you can’t resolve your case at IRS Appeals, you probably will receive a Notice of Deficiency. Then, you have 90 days to respond, by filing in the U.S. Tax Court. You want to keep your tax dispute going so the tax debt does not become final.
If despite all this, you get a certification that your tax debt is ‘seriously delinquent’ contact the phone number listed on the IRS Notice. If you’ve already paid the tax debt, send proof to the address on the Notice. If you need your U.S. passport to keep your job, once your seriously delinquent tax debt is certified, you must fully pay the balance, or make an alternative payment arrangement to keep your passport. Once you’ve resolved your tax problem with the IRS, the IRS will reverse the certification within 30 days of resolving the issue.
Other ways to keep your passport would be striking a deal with the IRS. It is often not too difficult to get an installment agreement with the IRS to pay your tax debt over time. If you sign one, stick to its terms. Even if your debt is huge, the IRS doesn’t call it ‘seriously delinquent’ if you are paying the installments on time. Alternatively, you can try making an offer in compromise to settle with the IRS. If the IRS accepts an offer in compromise to satisfy the debt, the rest of it can be forgiven.
If you owe the IRS $50,000 or more, call Richard Schickel at 520-448-3531 and he can help you to resolve whatever the tax issues are.