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US RESIDENTS WITH IRS TAX DELINQUENCIES BEWARE

The Internal Revenue Service (“IRS”) has a new collection tool for taxpayers with serious delinquent tax deficiencies and it was created under § 7345 of the Internal Revenue Code. The tax section authorizes the IRS to certify to the State Department individuals who have serious delinquent tax debt. Receipt of the certification allows the State Department to deny or revoke the individual’s passport or limit it to permit only a return travel to the U.S. For purposes of enforcement, a “seriously delinquent tax debt” is defined as a tax liability (tax, penalty and interest) of an individual which meets all the following requirements: (i) the tax liability has been assessed; (ii) the liability is greater than $51,000; and (iii) a levy was issued or a notice of lien has been filed and the taxpayer has either exhausted its administrative rights or failed to timely exercise those rights. An individual will not be classified a seriously delinquent taxpayer if: (i) the taxpayer is paying the liability in installment payments approved by the IRS; (ii) the liability is being paid through an offer in compromise; or (iii) collection of the debt has been suspended under certain circumstances such as innocent spouse relief. In addition, in its discretion, the IRS may not certify an individual as a seriously delinquent taxpayer where: (i) the liability is uncollectible due to hardship; (ii) the liability results from identity theft; (iii) the taxpayer is in bankruptcy; or (iv) they are serving in a combat zone or participating in a contingency operation. The IRS may reverse a certification if: (i) all certified tax modules are fully paid; (ii) the tax becomes legally unenforceable; (iii) the tax debt falls under one of the statutory exclusions; or (iv) an adjustment reduces the tax debt below $51,000. To invoke the certification process the IRS must send a notice of certification to the taxpayer contemporaneous with sending the notice to the State Department. Upon receiving this notification, the taxpayer has a right to challenge the certification.