The Internal Revenue Service (IRS) imposes various penalties when people owe back taxes. This is to provide an incentive for taxpayers to resolve their tax debt. The IRS FAST Act is a policy that affects passports for people who owe serious delinquent tax debt. If you are wondering, “What is the IRS FAST ACT?” consider contacting a tax lawyer from Damiens Law for assistance. You can reach us at (601) 957-9672.
FAST Act basics
The Fixing America’s Surface Transportation Act (FAST Act) allows the IRS to cause a taxpayer to have their passport application or renewal rejected by the State Department. The IRS notifies the State Department of taxpayers the agency has certified as owing a significant delinquent tax debt. If a certified taxpayer submits an application to apply for a passport or renew their existing passport, the State Department must deny it. Additionally, the State Department has the discretion to revoke the passport of certified taxpayers or limit the taxpayer’s ability to travel abroad.
Purpose of the IRS FAST Act
The FAST Act is intended to create an incentive for taxpayers to resolve their tax debt. If they want to travel abroad or frequently travel overseas for work, their ability to do so can be hindered by not paying off their back tax debt. The law codifies the government’s ability to restrict passports for people who owe a large amount of unresolved tax debt.
What is seriously delinquent tax debt?
Generally, the IRS considers a significant delinquent tax debt as owing $52,000 or more in back taxes.
Exceptions to seriously delinquent tax debt leading to decertification
I.R.C. § 7345 and the FAST Act provide a number of exceptions so that taxpayers will not be certified to the State Department as having a serious delinquent tax debt and have their passport eligibility affected. These exceptions include:
- The taxpayer is currently paying off their debt with an installment agreement
- The taxpayer is paying off tax debt in a timely manner pursuant to an offer in compromise
- The taxpayer has made a settlement agreement with eh Department of Justice
- The taxpayer has made a claim for innocent spouse relief and collection is suspended
- Collection is suspended because the taxpayer has requested a CDP hearing
- The taxpayer is currently serving in a combat zone
These exceptions automatically apply. However, there are additional discretionary exceptions that can prevent a taxpayer from being certified to the State Department. According to the IRS, current discretionary exclusions include:
- The taxpayer is currently in bankruptcy
- The tax debt is due to identify theft
- The taxpayer has made an offer in compromise to the IRS that is currently pending a decision
- The taxpayer lives in an area that has been federally declared as a disaster area
- The IRS has granted an accepted adjustment that will satisfy the tax debt
- The taxpayer has requested to enter into an installment agreement with the IRS
- The IRS has determined the tax debt is not collectible due to hardship|
Additionally, the Secretary of State can opt not to certify a taxpayer for emergency situations or humanitarian purposes.
What is the process to deny or revoke a passport?
The process to certify a taxpayer as having a seriously delinquent tax debt and ultimately deny or revoke their passport involves the following steps:
IRS certifies the taxpayer
The IRS must determine that the taxpayer has an unpaid and legally enforceable federal tax liability of $52,000 or more. This total can include interests and penalties. The IRS must also be able to demonstrate that it has taken appropriate steps to collect the debt by:
- Issuing a tax lien notice
- Giving the taxpayer the opportunity to exhaust their administrative rights
- Issuing a tax levy
The IRS must have issued a Final Notice of Intent to Levy to the taxpayer and notified them of their right to a CDP hearing or have already issued a tax levy.
IRS provides notice
The IRS issues a certification of a significant and serious delinquent tax debt to the State Department and also provides notification to the taxpayer of this certification. The notification informs the taxpayer that the IRS has notified the State Department of the delinquency and that their passport will be revoked.
Taxpayers can challenge the action
Once the taxpayer becomes aware of this possible action, the taxpayer can challenge the certification.
State Department does not issue a new passport
If the taxpayer submits an application for a new passport or tries to renew an existing passport, the State Department cannot issue the passport unless emergency circumstances or humanitarian reasons exist for the travel. Additionally, the State Department has the discretion to revoke a passport that has already been issued.
IRS reverses certification
If the taxpayer submits and application for a passport, the State Department holds the application for 90 days to allow the taxpayer to resolve the issue, which may include:
- Making full payment of the tax debt
- Entering into a payment alternative with the IRS
- Resolving erroneous certification issues
- Reducing the tax debt under the $52,000 threshold
- Demonstrating that the tax debt falls into one of the exceptions
If any of these actions are taken so that the taxpayer is no longer certified, the IRS decertifies the taxpayer. Otherwise, the State Department will reject the application and notify the taxpayer of this.
IRS Fresh Start Program
Taxpayers have many potential ways to resolve tax debt that is threatening their ability to obtain or maintain a passport. Taxpayers may have various options available to them through the IRS Fresh Start Program. The IRS must offer the program to eligible taxpayers who have current tax debts. The program offers ways for taxpayers to resolve their tax debt to get a “fresh start.”
Who qualifies for the IRS Fresh Start Program?
Taxpayers must generally be able to pay tax debt through a repayment plan and meet the following eligibility criteria:
- Have tax debt of less than $52,000 or the ability to repay most of the tax debt
- Be able to pay the tax debt in less than five year
- Not have a previous back history of taxes owed to the IRS
- Able to pay per the terms of the installment agreement
- Be current on tax filings
Businesses can also apply for the Fresh Start Program. Eligibility criteria for businesses include:
- The total tax debt is less than $25,000
- The owner can repay the tax debt in under three years
- The owner is up to date with the payment of federal employment tax filings
- The owner does not have a previous history of owing back taxes to the IRS
What are the benefits of being part of the IRS Fresh Start Program?
Benefits of the IRS Fresh Start Program include:
- Taxpayers may be able to have some of their penalties reduced, thereby decreasing the total amount owed
- Taxpayers can have a federal tax lien removed if their debt falls below a certain threshold
- Taxpayers can request a grace period of six months to file and repay taxes without incurring additional penalties
How does the IRS Fresh Start Program work?
You may be eligible for one or more of the following forms of tax relief under the IRS Fresh Start Program:
Offer in Compromise
An Offer in Compromise allows a taxpayer to offer to pay less than they owe to resolve their tax debt. This option is available to taxpayers are in difficult financial situations and do not have the financial resources to pay off their tax debt in full.
Penalty abatement eliminates or reduces penalties charged to the taxpayer. There must be a reasonable cause for the IRS to apply a penalty abatement.
An installment agreement is a payment plan with the IRS. The taxpayer and IRS agree to an amount the taxpayer will pay each month for a certain number of months until the tax debt is resolved. Entering into an installment plan provides additional benefits, such as:
- The IRS must stop sending collection letters
- The IRS does not garnish wages
- The IRS does not pursue asset seizure remedies
Currently not collectible status
Another option under the Fresh Start Program is to be considered in “currently non-collectible status” by the IRS, which provides a reprieve from collection activity. However, once the taxpayer is no longer in this status, collection activity can continue.
How a tax lawyer can help
If you are currently facing significant tax debt, a tax lawyer from Damiens Law can help. We can meet with you and address any questions or concerns you may have, such as:
- What is the IRS FAST Act?
- Will my passport be denied because of my tax issues?
- What is the IRS Fresh Start program?
- What type of tax relief do I qualify for?
- Is it possible for me to resolve my tax debt for less than I owe?
- Is there any way to reduce the penalties I owe?
- What legal arguments can I make to reduce or eliminate my tax debt?
Contact a knowledgeable tax lawyer for help
If you are wondering, “What is the IRS FAST Act and how may it affect me,” consider contacting a knowledgeable tax lawyer from Damiens Law for help. Schedule your confidential consultation by calling (601) 957-9672.