Passport Notice

Posted on by katemley

IRC 7345

The Tax Court ruled in Guy Alvarez Gayou v. Comm’r of Internal Revenue, T.C. Memo 2023-61, Filed May 16, 2023 that the IRS properly certified the taxpayer’s account as seriously delinquent under the law for action by the Secretary of State as it relates to the denial, revocation or limitation of a taxpayer’s passport.  This ruling is representative of the rather straightforward effect of the now 7-year-old law. As the Court explains, a taxpayer may be notified that they have a “seriously delinquent tax debt,” and that certification shall be transmitted to the Department of State so that the Secretary of State may act, as reflected above, relating to the taxpayer’s passport.  The assessment amount for this process must be higher than $50,000 – which has adjusted for inflation and currently stands at $59,000. The Court analyzed the exceptions to the definition of “seriously delinquent tax debt,” to support the taxpayer’s position.  Those exceptions are: 1) that the debt is being paid in a timely manner pursuant to an installment agreement under IRC section 6159, 2) that the debt is being paid properly under an Offer in Compromise, 3) that collections is suspended because the taxpayer asked for a Collection Due Process hearing, or 4) that collections is suspended while the IRS reviews an application for innocent spouse relief.  While the taxpayer previously had an installment agreement in place, he did not have one in place at this time. This is the most common way to decertify the seriously delinquent debt and put one’s passport in good standing.  

Passport: Seriously Delinquent Taxes

Posted on by katemley

IRC 7345

The Tax Court ruled in Ifeoma Ezekwo v. Comm’r of Internal Revenue, T.C. Memo 2022-54 filed May 31, 2022 that there was no error in the Commissioner’s certification to the Department of State that the taxpayer had a “seriously delinquent tax debt,” and that her passport could be revoked, limited, or an application for the same could be denied.  IRC Section 7345 provides that if the IRS certifies that a taxpayer has a “seriously delinquent tax debt,” that certification is transmitted to the Department of State for action relating to a taxpayer’s passport.  A “seriously delinquent tax debt” is one that is unpaid, legally enforceable, and in excess of the current threshold adjusted for inflation – currently, $55,000. It is important to note that if a taxpayer is on an installment agreement, or in currently not collectible status, they are not seriously delinquent for this purpose.  This case is a straightforward fact pattern with a taxpayer seemingly in denial that they still owed the government money after levy.  As such, the Court disposed of the matter quickly.  Of note, the Court stated that the only determination they are allowed to make under the statute is whether the Commissioner’s certification of a taxpayer as seriously delinquent was “erroneous.”  They made this point to illustrate the fact that they cannot review the underlying liabilities in a review of the certification.  The Court also pointed out a couple of exclusions for debts that could be certified.  One was relating to a pending Collection Due Process hearing. If timely filed, the debt associated with the periods that triggered the hearing rights would not be included in the total debt for certification purposes.  Also, the Court explained that a debt for which innocent spouse relief is requested will not be part of the certification.   Taxpayers who have disagreements with the government, and are close to the threshold, could pay down the liability below the current amount that triggers the certification and de-certify.  Additionally, this author would note that if a case is assigned to a field Revenue Officer, there are provisions that allow them to expedite a request for decertification if a taxpayer meets an exemption – such as the placement of an installment agreement. During the pandemic, the certification process was paused.  That has since restarted and taxpayers are being certified at this time.