IRS Law Blog

The IRS has the power to take your wages, bank accounts, house, and even your retirement account.

Additionally, they have the power to restrict your travel.

Maybe you are getting ready to travel overseas on a business trip, or have a long-planned trip abroad to visit friends or family members. Maybe you are overseas now and want to return to the states.

If you owe money to the IRS, your travel plans can be in jeopardy.

Internal Revenue Code Section 7345 allows the IRS to revoke, deny, and limit your passport if you have unpaid taxes.

To notify you that they want to take away your passport and stop your travel plans, the IRS will send you Letter CP508C, Notice of Certification of Seriously Delinquent Federal Tax Debt to the State Department. After sending the CP508C letter, the IRS will notify the State Department of your tax debt. Then, the State Department can take action to implement travel restrictions.

Here is how to ensure that the IRS is following passport revocation laws, protect your passport, and respond to a CP508C letter to get your travel plans:

• Your balance owed must be under $51,000.

IRS passport denials are limited to higher balances, which tax laws currently define as over $51,000 (adjusted every year for inflation).

If you owe under $51,000, your passport cannot be taken, and would be safe from the IRS.

• Even if you owe more than $51,000, the IRS must have previously sent you a Final Notice of Intent to Levy, or filed a Federal tax lien.  

Before the IRS can levy/garnish your paycheck, your bank account, or other property, tax laws require them to send you official notice first. This is known as a Final Notice of Intent to Levy.

The IRS can also file tax liens against your property, giving the IRS security in your assets.  If you have a house, and the IRS files a tax lien, the lien would be similar to a mortgage on your house.

Here is how levies and liens are important to your passport:  The Final Notice of Intent to Levy or tax lien must be sent at least 30 days before the IRS mails the CP508C letter. Even if you owe over $51,000, if the notice of intent to levy or tax lien has been sent, your passport is protected from the IRS.

If the IRS has sent either the Final Notice of Intent to Levy or the CP508C letter within the last 30 days, tax laws permit an appeal to be filed to dispute the IRS filing. This is known as a collection due process appeal. While the appeal is pending, any action against your passport is put on hold and it is protected.

If you are unsure whether the IRS has sent you a Final Notice of Intent to Levy, or filed a tax lien, they can be contacted for a full background check to confirm the status of your account.

• Get an installment agreement with the IRS.

The IRS wants what you want – to have your account in good standing, rather than in active collection status with potential levies on your accounts and liens against your property.

An installment agreement not only stops the IRS from levying, but it will fix your passport issue.

The IRS offers many different installment agreement options, including streamlined agreements to partial pay installment agreements.

Streamlined installment agreements are designed to repay your liability in full, and require no financial disclosures about where you work, bank, or of your property.  They are available on balances under $100,000, and require full payment of your taxes over as much as 84 months.  This represents the IRS opening itself up to simplifying the process of resolving your account and passport.

Partial pay agreements require the IRS to accept payment terms even if you cannot pay them back in full.  In other words, you do not have to repay the IRS to keep your passport, just have a payment plan in place.

• Put your IRS debt in “currently not collectible” status.

If you are unable to make any payments to the IRS, you can still protect your passport. If this can be proven to them, the IRS can agree that no payments are required. The IRS calls this “currently not collectible,” which not only places your account in good standing so you can travel, but stops the IRS from coming after your wages and accounts.  Once you are in currently not collectible status, your passport should not be taken, and if you have received the CP508C, it should be returned.

• File an offer in compromise to settle your IRS debt.

An offer in compromise is used by the IRS to settle your debt and give you a fresh start.  If the IRS accepts an offer in compromise, you will no longer owe them any money. They will not be able to levy your wages or property and will have no claim to your passport.

But it can take the IRS between 12-18 months to process, investigate, and accept an offer in compromise.  However, if the IRS has already sent the CP508C, the compromise must be accepted before the IRS will take action to return your passport.  Conversely, if you have not yet received the CP508C passport revocation letter, filing a compromise now will prevent the IRS from sending it.

• Dispute the amount you owe the IRS.

Remember, tax laws permit the IRS to come after your passport only if you owe over $51,000.

But what if the IRS has you owing over $51,000 and you believe it’s wrong?

This can occur when you disagree with an IRS audit or when you do not file your tax returns and the IRS files estimated returns for you.  These estimated tax returns, known as Substitute for Returns, usually overstate your taxes as you are not given proper deductions.

We can request the IRS to reopen an incorrect tax estimation, take another look at your records, and lower the amount you owe.

If the IRS has filed Substitute for Returns, the original returns can be prepared and filed to correct and reduce your taxes.

The end result is if your real balance should be under $51,000, and we correct it and the IRS agrees, your passport will be restored.

• Bankrupt your taxes so you no longer owe the IRS.

Bankruptcy can wipe out an IRS tax debt.  Currently, the IRS will restore your passport if you file a bankruptcy which results in eliminating your IRS liability.

In most cases, there are two bankruptcy options for you:  A Chapter 7 and a Chapter 13.  A Chapter 7 bankruptcy usually takes 3-5 months to complete, much shorter than that of an offer in compromise, while a Chapter 13 takes 3-5 years.  Generally, a Chapter 7 bankruptcy would be for you if you cannot afford to repay your taxes and any other debts.  If you have extra money at the end of every month, you would likely be able to only file a Chapter 13.

• File a request for innocent spouse relief, using IRS Form 8857.

The IRS can grant you relief from a joint tax liability under Federal innocent spouse laws.  This takes you off the taxes of a current or former spouse.

Once you have filed your innocent spouse claim and it has been processed by the IRS, they will be prevented from taking your passport, and will have return it back to you while they investigate your innocent spouse claim.

There are three primary ways to qualify for innocent spouse relief.

First, you could be eligible for tax relief from your spouse’s taxes if you are widowed, divorced or legally separated from your spouse, or living separately from your spouse, in the 12 months before filing the innocent spouse claim.  If so, passport action by the IRS would stop.

Alternatively, if the tax is owed from an IRS audit of tax return, and we can show the IRS that you had know reason to know that your spouse’s part of the return was wrong, the IRS can release you from the taxes, grant innocent spouse relief, and return your passport.

Lastly, you can also get innocent spouse freedom from another’s taxes if you can show the  IRS that it would be unfair to hold you responsible for payment.  Fairness includes domestic/spousal abuse against you, fraud, hardship to you to repay the taxes, and whether you received a benefit from the taxes not being paid.

When the IRS comes after your passport, it is natural to be overcome by fear and terror. Fortunately, there are paths to getting you back on the road, to travel out of the country for business or personal, see friends and family members, or simply travel for pleasure.

IRS passport revocation is designed to grab you attention, but there are many remedies to this powerful IRS enforcement program.  Some solutions (currently not collectible, bankruptcy, innocent spouse relief) do not even require repayment in exchange for a return of your passport.  Other types of passport resolution are focused on correcting the liability and bringing it under $51,000, settling your debt with a compromise, or entering into an installment agreement.  The IRS does not have to stand in the way. Your passport can be returned.