When my son was two, his grandmother gave him a stuffed owl. Not a particularly creative toddler, he named the little owl Stuffy, and the name has stuck to this day.
He took the owl everywhere, which naturally led to many a calamity when Stuffy was inevitably misplaced. For my wife and I, Stuffy also had an unintended consequence—leverage.
The boy-child needed Stuffy to go to sleep. So, when he was being unabashedly insolent, the threat of taking the owl usually remedied the situation. When the threats failed, and the tantrum moved the needle from angry little person to questionably-possessed imp, the actually seizure the owl was our only means of recourse.
So, what the hell does this have to do with tax?
Taxpayers are Basically Toddlers
I have been a tax controversy attorney for a while now, and I have come to observe that many taxpayers are of the same ilk as petulant toddlers. When the threats of punishment fall on deaf ears, and the mild consequences do not seem to have any effect, you have to strike where it hurts the most—the stuffed owl—or in the IRS’s case, the taxpayer’s passport.
A Seriously Delinquent Tax Debt
In 2015, Congress gave the IRS to ask the State Department ever so politely to deny, limit, or even revoke a person’s U.S. passport if that person had a tax debt of over $50,000. The IRS may only “certify” a tax debt as “seriously delinquent” if it has already threatened to take the owl—that is, if the IRS has already filed a lien or issue to levy. We discussed liens and levies in this earlier post.
Once the IRS notifies the State Department, it has moved past threatening to take the owl. If a taxpayer has a tax debt over $50,000, which is certified as seriously delinquent, the State Department generally must deny the taxpayer a U.S. passport or deny the renewal of that taxpayer’s U.S. passport. In certain circumstances, generally the more egregious cases, the State Department may revoke the taxpayer’s U.S. passport. The IRS may request that the State Department revoke a passport, but it lacks the authority to do so itself. In all cases, the taxpayer must be notified before any action is taken.
The Taxpayer’s Recourse
Under certain circumstances, even if the taxpayer owes more than $50,000, the IRS will not certify the tax debt as seriously delinquent. Taxpayers who are timely paying off their debt under an installment agreement or an offer in compromise will not be certified. The IRS has the discretion not to certify a taxpayer’s debt under limited circumstances such as bankruptcy, identity theft, and when it deems the taxpayer to be “currently not collectible” due to a hardship. If a taxpayer believes that the IRS improperly certified its tax debt, he or she can bring an action against the United States in the Tax Court or any Federal District Court.
Reversal of Certification
If at debt that was previously certified becomes legally unenforceable or ceases to be a seriously delinquent tax debt, the IRS will decertify the debt, meaning that the taxpayer’s rights to a U.S. passport will be reinstated. Importantly, a taxpayer cannot simply pay enough to bring the debt below $50,000 in order for the IRS to reverse the certification. As with certification, the IRS has limited discretion if that taxpayer later files for bankruptcy or is determined to be currently not collectible due to hardship. Decertification generally takes 30 days, but a taxpayer may apply for expedited decertification in certain circumstances.
Pay your damn taxes.
If you have a large tax debt (over $50,000) there is a fair to middling chance that the IRS will ask the State Department to deny, limit, or even revoke your U.S. passport. Although the IRS has discretion not to ask the State Department to intervene, the discretion is quite limited. The easiest way to avoid the denial, limitation, or revocation of your U.S. passport (aside from paying your damn taxes in the first place) is to enter into and timely pay an installment agreement or an offer in compromise. We discussed collection alternatives briefly in this article, and we will explain each in more detail in a later post.
 This amount is indexed for inflation. As of January 1, 2020, the threshold amount was $53,000.
 A previously certified debt only ceases to be seriously delinquent tax debt when a statutory exclusion is met, such as entering into and timely paying an installment agreement or offer in compromise, when a request for innocent spouse relief or a CDP hearing is pending. Certification will not be reversed where a taxpayer requests a CDP Hearing or Innocent Spouse relief for tax periods which are not the basis of the certification.Add to favorites