Passports & Tax Debt

Posted on by katemley

IRC 7345


Affecting a taxpayer’s passport is a powerful tool to force filing and payment compliance, in many instances.  The Tax Court in Pfirrman v. Comm’r, filed March 18, 2025 at T.C. Memo 2025-22 walks us through the analysis.  This particular taxpayer was attempting to inappropriately challenge his underlying liability. But the case details how a passport can be used to motivate taxpayers to comply with filing and paying requirements.  This practitioner has dealt with many clients who have a high level of interest in meeting the statutory goals of IRC 7345.  Under this Code provision, if the Commissioner certifies that a taxpayer has “seriously delinquent tax debt,” then that certification is transmitted to the Secretary of State for action with respect to denial, revocation, or limitation of the taxpayer’s passport. Generally, a seriously delinquent tax debt is a federal tax liability that has been assessed, exceeds $64,000 (2025 inflation adjusted), and is unpaid and legally enforceable.  It should be kept in mind that it is entirely possible to either avoid certification, or have a taxpayer decertified as seriously delinquent, even if they owe over this amount, if they move into a compliant filing and paying status. In other words, once on a valid installment agreement, partial payment installment agreement, or placed into Currently Not Collectible, a taxpayer will no longer be deemed seriously delinquent, no matter how much they owe.  Much of the remaining part of the opinion was an explanation by the Court of the limitations of their jurisdiction under the statute. The Court may reverse certification if it is erroneous, or determine whether the IRS has failed to reverse the certification.  Should the Court find such facts to exist, it is limited to ordering the Treasury Secretary to notify the Secretary of State of such determination.  The Court lacks any further power.  In sum, find a compliant outcome and the matter will automatically be decertified to the Department of State. 

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.