Does IRS Notice CP508C Mean You Can Lose Your Passport?

Does an IRS Notice CP508C Mean You Lose Your Passport

Does an IRS Notice CP508C Mean You Lose Your Passport?

The Internal Revenue Service has significantly increased enforcement against taxpayers who have a significant amount of tax debt. While the IRS can use traditional means to collect money from the Taxpayer, such as levies, liens, and seizures, –one of the newest types of enforcement protocols that the IRS has been following in the past few years is to go after a taxpayer for their passport. The IRS can prevent the passport from being renewed or that the passport application is declined. This can have serious consequences for taxpayers who travel extensively using their U.S. passport and slash or live overseas and would not be able to travel back to the United states without a passport. The IRS will issue a CP508C notice when it believes that the taxpayer has a seriously delinquent debt under internal revenue code section 7345. But, just because a Taxpayer receives the CP508C notice does not mean the taxpayer will lose their passport.

26 U.S. Code § 7345 – Revocation or denial of passport

• • • (a) In general

      • If the Secretary receives certification by the Commissioner of Internal Revenue that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 32101 of the FAST Act.

• • • (b) Seriously delinquent tax debt

      • (1) In general

        • For purposes of this section, the term “seriously delinquent tax debt” means an unpaid, legally enforceable Federal tax liability of an individual—

          • (A) which has been assessed,

          • (B) which is greater than $50,000, and

          • (C )with respect to which—

            • (i)a notice of lien has been filed pursuant to section 6323 and the administrative rights under section 6320 with respect to such filing have been exhausted or have lapsed, or (ii)a levy is made pursuant to section 6331.

          • (2) Exceptions Such term shall not include—

            • (A) a debt that is being paid in a timely manner pursuant to an agreement to which the individual is party under section 6159 or 7122, and (

            • (B) a debt with respect to which collection is suspended with respect to the individual—

              • (i) because a due process hearing under section 6330 is requested or pending, or

              • (ii) because an election under subsection (b) or (c) of section 6015 is made or relief under subsection (f) of such section is requested.

Sample CP508C Notice

• • • “On December 4, 2015, as part of the Fixing America’s Surface Transportation (FAST) Act, Congress enacted Section 7345 of the Internal Revenue Code, which requires the Internal Revenue Service to notify the State Department of taxpayers certified as owing seriously delinquent tax debt. The FAST Act generally prohibits the State Department from issuing or renewing a passport to a taxpayer with seriously delinquent tax debt. We have certified to the State Department that your tax debt is seriously delinquent.

    • We show that you still owe [Amount]. This amount includes penalty and interest computed to 30 days from the date of this notice. This notice only includes the portion of your tax debt that has been certified to the State Department as seriously delinquent, as defined below. You may have additional tax debt that is not included in this notice.”

What You Need to Know

• • • “Seriously delinquent tax debt is tax debt (including penalties and interest) totaling more than $52,000* for which:

      • We have filed a Notice of Federal Tax Lien and your administrative rights under Internal Revenue Code (IRC) Section 6320 have been exhausted or lapsed, OR

      • We have, at any time, issued a levy to collect this debt.

        • The $52,000 threshold is adjusted yearly for inflation. If you apply for a passport or passport renewal, the State Department will deny your application and will not issue a passport to you or renew your current passport.

        • If you currently have a valid passport, the State Department may revoke your passport or limit your ability to travel outside the United States.”

What You Need To Do

If you agree with the balance due

• • • “To prevent the State Department from denying, revoking, or limiting your passport, you must:

      • Pay the full amount you owe, as shown above.

      • Make alternate payment arrangements, such as an installment agreement, that allows you to pay off your debt over time, or an offer in compromise to settle the debt. Visit www.irs.gov/payments for more payment options. Make your check or money order payable to the “United States Treasury.” Write the taxpayer ID numbers (TINs) listed in the “Your billing details” section of this notice on your payment. Return the last page of this notice with your payment.”

 If you disagree with the balance due

• • • “If you’ve already paid the tax debt listed above, please send us proof of that payment. If you don’t agree that you owe the tax debt listed above, or want to contest the certification for another reason, you can call us at the phone numbers listed on the first page of this notice.

    • You can also bring a civil action in a district court of the United States or the United States Tax Court to have a court determine if the certification was erroneous or if the IRS has failed to reverse the certification as required by IRC Section 7345(c).

    • You are not required to contact us or otherwise exhaust administrative remedies before filing a civil action. If you have a power of attorney (POA) You will need to contact your POA directly since the information in this notice may not be covered under the POA filed.”

What Should You Do?

Due to the ramifications of having a passport denied or rejected come with taxpayers who receive a CP508C notice should be quick to act and be sure to speak with the Board Certified Tax Law Specialist to assess the potential strategies and options for getting into compliance. For taxpayers who have not received the letter yet and are out of compliance, they may consider one of the offshore amnesty programs to get into compliance before they receive a CP508C notice.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.