In my first blog on passport issues, I discussed the importance of providing notice to taxpayers prior to certifying their seriously delinquent tax debts to the Department of State (DOS). Once the IRS makes the certification, the DOS must deny the person’s passport application and it may revoke their passport, except in certain emergency and humanitarian situations. Under the IRS’s current policy, the only direct notice prior to the certification is through language buried in the middle of the CDP notice, which was not included at all for taxpayers who received their CDP notices prior to January 2017. This policy impairs due process rights and the taxpayer’s right to be informed and right to challenge the IRS’s position and be heard.
As the IRS begins certifications in the coming months, there will most certainly be taxpayers who are caught unaware when the IRS certifies their seriously delinquent tax debts to the DOS. At the start of the implementation, the DOS will only be denying passport applications and will implement the revocation program at a later date. Although the DOS will hold an applicant’s passport application open for 90 days to allow the taxpayer to resolve the tax debt, taxpayers may need their passports immediately for travel, such as upcoming business travel, which would not fall under the DOS’s discretion to grant a waiver for emergency or humanitarian reasons.
Today, I’d like to look at some examples of how the passport certification process will operate. These examples show how unnecessary certifications and reversals are inefficient for the IRS and burdensome to the taxpayer when prior notice to the taxpayer could have resulted in resolution of the tax debt. In the first set of examples, we see that simply paying the tax debt to decrease it to or below $50,000 (adjusted for inflation) is not enough to reverse the certification. However, if the IRS reverses the certification for another reason (for example the taxpayer enters into an IA), then the IRS cannot recertify the debt if it is currently at or below the $50,000 (adjusted for inflation) threshold.
Example 1: Paying Liability to or Below $50,000 (adjusted for inflation)
TAS will assist certified taxpayers in resolving their tax debts and correcting their accounts. While virtually all passport cases will meet TAS’s financial or systemic burden case criteria, I have also designated all passport denial and revocation cases as meeting TAS Case Criteria 9, Public Policy. However, the IRS has rejected my repeated requests to exclude already open TAS cases from passport certification. By definition, taxpayers who are working with TAS are working to resolve their seriously delinquent tax debts. The next set of examples demonstrates the harm to taxpayers caused by the IRS’s decision not to exclude open TAS cases from certification as part of its discretionary authority.
Example 2: TAS Case Opened
Although the taxpayers in these examples ultimately have their certifications reversed, the IRS’s failure to exclude taxpayers from the certification list during the time their cases are open in TAS results in burden and harm to these taxpayers. This approach also results in extensive and unnecessary work for both TAS and the IRS. TAS has developed a process for excluding open TAS cases from the Private Debt Collection initiative, and it is baffling why the IRS will not adopt that procedure for passport certification cases.
The final example set shows the difference between a taxpayer who pays the tax debt below the $50,000 threshold while temporarily meeting one of the certification exclusions (in this case CNC status) and a taxpayer whose tax debt remains above the threshold.
Example 3: CNC status
I believe that in many cases, a certification could be avoided by providing the taxpayer with a stand-alone notice prior to the certification. This notice would alert the taxpayer to the specific harm that will occur if he or she doesn’t resolve the tax debt and provide an opportunity to resolve the debt or challenge the determination. However, because the IRS does not currently provide such a notice, taxpayers will continue to be certified and will not resolve their tax debts until after the certification. This process burdens the taxpayer and causes extra work for the IRS, who must process the certification and reversal of the certification, when an adequate warning of the certification may have been enough to spur the taxpayer to resolve the debt.
The IRS’s approach ignores the entire reason for the notice (and for taxpayers’ right to be informed), which is to motivate the taxpayer to take action. Merely placing a random paragraph among many other pieces of important information may not be sufficient to put a person on notice such that they have the necessary knowledge and take the desired action. If the IRS really wants the taxpayer to resolve the tax debt, it would design its notices to prompt the taxpayer to take action. The notice sent contemporaneously with the certification is too late. This brings into question whether the IRS is actually trying to give the taxpayer notice and encourage the resolution of the tax debt.
The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.
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