Jeopardy assessment could cost you your passport

  • by Jimmy Sexton
  • May 24th, 2016


“My passport is what?” “Revoked”, replies the girl at the girl at the check-in counter.

There you stand waiting to start that romantic getaway you have been planning for months.  A trip to a far-away place with tropical breezes and drinks with little umbrellas.  Everything was in order. Reservations confirmed. Flights arranged. Pets kenneled.  After the hectic planning and last minute burdens on the job, this trip will is well deserved and needed.  But now you are trying to check-in for your flight and your passport is revoked?

And, if you are lucky enough to be able to leave the country it is possible you won’t be able to enter the U.S. when you’re ready to return because your passport was revoked while you were abroad!

These scenarios may sound extreme, but it is possible it could happen to you if you owe the IRS money, or even if they just claim you do!  If the IRS certifies that you have a seriously delinquent tax debt, the State Department can revoke your passport, refuse to issue/renew your passport, or limit its use.  So what is considered a serious delinquent tax debt? Owing more than $50,000 in taxes, including interest and penalties.

Passport revocation is part of a new section 7345 of the tax code called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”  This little tidbit of legislation was buried in a totally unrelated and massive infrastructure spending bill. The State Department will act based on what the IRS certifies is true. Due to the newness of this code section it is not clear when your passport would be revoked, or exactly what the process is. One thing that’s clear is the IRS is looking at this as a new way to bring in money. Some estimates suggest that the provision will net $400 million over the next 10 years.

Here are some concerns.

You could be contesting a tax assessment with the IRS administratively or in court. It is quite possible that the IRS is wrong and that you don’t actually owe them more than $50,000.

Another concern is that the IRS can issue what is known as a “jeopardy assessment.” This assessment is made if the IRS feels that the normal steps for collection might be difficult, the taxpayer has been non-compliant in the past, that the taxpayer may be a flight risk, or the statute of limitations is about to run out. The jeopardy assessment will cause all taxes, penalties, and interest to become immediately due and payable—whether or not the assessment is valid. And if they think that assessment is in jeopardy, the IRS can begin to collect the amount by levy without waiting the normal period after notice is given. The assessment is supposed to be used judiciously, but we know that the IRS can sometimes be impulsive.

The IRS is only required to send certifications of tax debt to your last known address and you do not have to acknowledge receipt.  So, they can certify your debt, file a tax lien, and report this to the State Department who will then revoke your passport even if the debt is not owed. You may have never even received the notification because the IRS sent it to your last known address—and we have seen many cases where the IRS conveniently forgets to update a taxpayer’s address.

What does this do to your passport? You now can’t travel until you’ve proven you don’t owe the IRS? This could have a major impact on businesses travelers that have done nothing wrong and don’t, in fact, owe any tax.

And, the problem is bigger than you might realize. Although you may think of passports as only being necessary for travel abroad, some people may need them for domestic travel as well.  This would apply to people living in states that have not complied with federal recommendations for stricter standards on state issued I.D.s; “real IDs”.

If you have any unsettled business with the IRS, it would be in your best interest to clear it up before you arrive at the departure gate.

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