In 2015, I wrote a blog post analyzing IRS collection performance, looking at the effects of different drivers of collection such as notices, installment agreements, liens, levies, and refund offsets. Today, I’d like to pick this topic back up, but focus on a collection issue associated with new legislation. In late 2015, Congress passed the Fixing America’s Surface Transportation Act (FAST Act), which aimed to boost tax collection through two avenues:
- Resuming the use of private collection agencies (PCAs) for certain delinquent accounts; and
- Requiring the Department of State (DOS) to deny a passport application and allowing it to revoke or limit a passport if the IRS certifies a taxpayer’s seriously delinquent tax debt.
I plan to blog about private debt collection in the future, but today, let’s discuss the new law that will deprive some taxpayers of their passports. Under the FAST Act, a seriously delinquent tax debt is an “unpaid, legally enforceable Federal tax liability of an individual”, which:
- Has been assessed,
- Is greater than $50,000 (adjusted for inflation), and
- Revenue Code (IRC) § 6323 and the Collection Due Process (CDP) hearing rights under IRC § 6320 have been exhausted or lapsed; or (2) a levy has been made under IRC § 6331.
However, there are statutory exceptions to the term “seriously delinquent tax debt.” These include:
- A debt that is being timely paid through an installment agreement (IA) or offer in compromise (OIC);
- A debt for which collection is suspended because the taxpayer requested a CDP hearing or a CDP hearing is pending;
- A debt for which collection is suspended because the taxpayer has requested relief from joint liability (known as innocent spouse relief).
The concept of restricting a person’s travel to incentivize behavior isn’t new. In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which requires the DOS to deny a passport application and allows the DOS to revoke or limit a passport if the person owes delinquent child support exceeding $5,000 (subsequently lowered to $2,500). Courts have long recognized that the right to travel internationally is a liberty right, protected by the Due Process Clause. See e.g., Kent v. Dulles, 357 U.S. 116 (1958). In the context of passport denial for unpaid child support, courts have found the statute meets due process requirements because it provides for notice and an opportunity to be heard prior to the state agency certifying the unpaid child support to the federal government. Weinstein v. Albright, 261 F.3d 127 (2nd Cir. 2001), aff’g 2000 WL 1154310 (S.D.NY 2001).
In the context of passport denial for a seriously delinquent tax debt, notice and an opportunity to be heard prior to the certification are limited. The FAST Act only requires two forms of notice to taxpayers who will be certified:
- a notice sent to the taxpayer close to or at the same time as the IRS certifies the seriously delinquent tax debt (“contemporaneous notice”), and
- language included in Collection Due Process (CDP) hearing notices explaining the potential certification.
Monthly payment agreements are available if the taxpayer needs more time to pay. They can apply for an installment agreement with the Online Payment Agreement tool.
Who’s eligible to apply for a monthly installment agreement online?
- Individuals who owe $50,000 or less in combined tax, penalties and interest and have filed all required returns
- Businesses that owe $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities and have filed all required returns
READ THE ENTIRE CONTENT OF HER COMMENTS HERE
In my next blog, I’ll discuss the actual operations of the passport certification process, showing how the IRS’s lack of notice leads to an inefficient and burdensome process.