There are many ways that falling behind on your taxes can negatively impact your life, freedom, and future. One consequence that may arise when you are seriously delinquent is the loss of your passport or a denied passport application. This program is relatively recent, having just rolled out in early 2018. 

If you have a significant amount of tax debt and the IRS has taken collection actions against you, losing your passport is a very real possibility. If you’ve received Notice CP508C, learn more about what it means and what happens next.

Why You Received CP508C

The IRS sends Notice CP508C when it considers your taxes to be seriously delinquent. By the time you receive this notice, the agency has already forwarded your information to the U.S. Department of State so they can either revoke your passport or deny your passport application.

The notice should contain the information you need to move forward and address the issue. It includes how much you have due, when it is due, and what you must do to avoid losing your passport. It also outlines the penalties and interest charged to your tax account.

When Late Taxes Are Considered Seriously Delinquent

The term “seriously delinquent” has a very specific meaning when used by the IRS. To be considered seriously delinquent, your taxes must exceed an amount set by the IRS each year. In late 2023, the limit was $62,000. This amount includes both the initial taxes owed and any penalties and interest added to the total.

In addition, the IRS must already have exhausted its administrative remedies under U.S. law. Generally, this means that the IRS should have filed a Notice of Federal Tax Lien or issued a levy to attempt to collect your tax debts before contacting the State Department. What does this mean for you? Basically, it means that by the time you receive CP508c, you should already know that your taxes are seriously delinquent. When you receive Notice CP508c, the IRS has already sent you multiple notices and attempted to collect your debts in other ways.

Tax Debts Not Reported to the State Department

Some types of tax debt are not certified to the State Department. Once you remove these debts, if your total due is below $62,000, your account is likely not considered seriously delinquent:

• FBAR debts
• Child support

Can You Keep Your Passport If You Have Serious Tax Debt?

As is often the case with IRS notices, you still have options if you have received Notice CP508C. Your options depend on if the tax debt is valid, if you are able to pay it in full, and if you have other payment options the IRS may accept.

Possible Solutions

The notice outlines your legal options. If you agree that the balance listed on the form is correct, you can either pay the full amount due, set up an installment agreement, make other payment arrangements, or request an offer in compromise that the IRS accepts. Upon receiving the certification of your tax debt, the State Department will wait for 90 days. This gives you plenty of time to either prove that the tax debt is inaccurate, pay the taxes due, or come to an agreement with the IRS regarding payment arrangements.

If you do not agree with the balance due, you will need to contact the IRS directly. You can contest the certification or take legal action against the IRS. However, as we generally recommend when you are facing serious consequences for delinquent taxes, your best option is to talk to a tax attorney about getting your passport back.

When the IRS Does Not Report to the State Department

Even if the taxes you owe exceed $62,000 or the threshold for the current year, the IRS may not certify your tax debt if you are currently paying on an installment plan, have an accepted offer in compromise, have requested innocent spouse relief, or have requested a collection due process hearing.

There are other extenuating circumstances under which the IRS will hold off on certifying the tax debt to the State Department including the following:

• Taxpayer is a victim of identity theft
• IRS had accepted an adjustment that will settle the debt
• Pending installment agreement request
• Pending offer in compromise request
• Taxpayer is in a federal disaster area
• Taxpayer has filed bankruptcy
• Taxpayer is serving in a combat zone
• Taxpayer is in currently not collectible status

Paying Down Your Tax Debt

With multiple options available to avoid losing your passport, it’s important to talk to a tax attorney about what the best option is for your specific situation. Paying the tax debt in full by the due date is the easiest option, but not realistic for most people—if they’d had the money to do that, they likely would have done it before it got to the point of losing their passport.

If paying in full is not an option, you can make an offer in compromise or apply for an installment agreement. Note that having an agreement in place with the IRS is what leads to them reversing your certification—not just getting your tax debt below $62,000. People have received this notice, made a minimum payment to get the balance below the current limit, and been surprised to find out that the IRS still proceeded with certifying their tax debt to the State Department. 

Even if your payment brings you below the threshold, that is not enough. You must make arrangements with the IRS. If you have arrangements with the IRS, they may reverse certification even if you are still above the $62,000 limit. That said, if you get your debt below the seriously delinquent level before the IRS sends out this notice, then you may be able to avoid the certification, whether you talk with the IRS or not.

What Happens If You Receive CP058C When Out of the Country

If you find out that you are losing your passport while you’re already abroad, it’s normal to panic. However, the U.S. State Department will then issue a limited-validity passport to let you re-enter the United States. After that, your passport will be revoked until you address your tax debt. They may also limit your current passport so it can only be used for return travel.

Getting Your Passport Back After Revocation or Suspension

Losing your passport due to tax debt is not permanent. The IRS will reverse your tax debt once you have met their requirements. This occurs when you have paid the debt in full, the debt is legally unenforceable, the debt is no longer considered seriously delinquent, or the initial certification was done in error.

Two of the most common paths to certification reversal are an accepted installment agreement or an offer in compromise. It’s recommended that you consult a tax professional before submitting paperwork for either of these options—once you have an accepted installment agreement, you are obligated to make those monthly payments until the debt is paid in full. Too many taxpayers have submitted an installment agreement application in a rush to avoid further consequences, only to find that the payment plan they requested is unsustainable for their budget. 

Working with an attorney ensures that you come up with a plan that is suitable for your finances. In a similar vein, you’ll want to submit the strongest offer in compromise application that you can. The IRS wants to collect as much as it can before agreeing to settle tax debt, so they will likely reject your offer if it is significantly less than you can afford or if you fail to justify why the IRS should allow certain expenses. Your lawyer can help you draw up a strong offer.

Generally, your certification is reversed within 30 days after you meet one of the requirements set out by the IRS. They will send Notice CP508R when they reverse certification.

Worried About Your Passport? Find Out If Yours is Suspended

If you know that you are over the $62,000 limit and your taxes are likely seriously delinquent, you may worry that your passport has already been suspended. Your first step is to contact the IRS and find out how much you owe. You may owe less than you think. If they verify that you owe more than $62,000, you can contact the National Passport Information Center to find out if your passport is still valid.

The Importance of Working With a Tax Attorney

When you face losing your passport or having your passport application denied due to seriously delinquent tax debt, the IRS has made multiple efforts to reach out to you to settle your tax debt. But since you owe so much, it is important to tread carefully. Agreeing to an unreasonable installment agreement or making an impractical offer in compromise could lead to further delays and issues with the IRS. 

Working with a trusted tax attorney gives you the chance to understand your options, decide which path forward best suits your needs, and send the appropriate documentation to the IRS.

The team at Damiens Law is here to help you protect your passport and your financial future. If you’ve received Notice CP508C or any other communication from the IRS regarding action taken against you, let’s talk. Call us at 601-957-9672 or send us a message online.