Page 3 - Passport Revocation and Denial for Seriously Delinquent Tax Debts: New IRS Procedures Signal More Stringent Enforcement

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COLUMNS I Tax Practice & Procedure

The TAS has noted that is difficult to If the IRS abates the penalty so that the (2)(A)]. If the reversal is because the tax-
imagine taxpayers will be able to resolve liability is below the threshold for certifi- payer has elected or requested innocent
the tax liability within these limited time cation, the taxpayer also may be eligible spouse relief, or because the taxpayer has
frames (2017 Annual Report to Congress, for decertification (IRM para. 5.1.12.27.8); entered into an installment agreement or
pp. 73, 80). The TAS’s statistics for resolv- however, not all penalty abatements will an offer in compromise, the notification
ing cases shows that the average collection result in decertification. For example, penal- must be made within 30 days after the elec-
case is open for 88 days, from receipt to ty abatement under the first-time abatement tion or request [IRC section 7345(c)(2)(B)–
completion of all necessary actions. policy does not result in decertification, (C)]. If the certification was erroneous, the
The IRS will not expedite the handling even if the adjusted liability is below the IRS must send the notification “as soon as
of a taxpayer’s request for installment pay- threshold amount (IRM para. 5.1.12.27.8). practicable” after it makes the finding [IRC
ment agreement or offer in compromise in The taxpayer can request expedited section 7345(c)(2)(D)].
order to avoid passport action, even if the decertification when all of the following Tax professionals should be aware that
taxpayer is traveling out of the country in conditions apply: the IRS will not systematically issue decer-
a short period of time [IRM para. n The taxpayer is eligible for decertification. tifications in all situations, and some will
5.8.1.8(6)]. The IRS generally handles n The taxpayer states that his foreign travel have to be done manually. In these situa-
requests for installment payment agreements is scheduled within 45 days or less, or the tions, one should monitor the decertification
and offers in compromise on a first-in, first- taxpayer lives abroad. to make sure that it is handled in a timely
out basis; it will expedite handling at the n The taxpayer has a pending application fashion. Situations where systematic decer-
request of the taxpayer in certain situations, for passport or renewal and provides his tification does occur include those where
such as where there is a contract or business passport application number and, if the the taxpayer pays the tax debt; the statute
agreement requiring the taxpayer to resolve taxpayer applied outside the United of limitations for collection expires; the tax-
the tax liability by a specific date, money States, location of passport application payer is in not collectible status; the tax-
to fund the offer is only available for a lim- (IRM para. 5.19.1.5.19.9.1). payer’s offer in compromise has been
ited time, or the taxpayer is terminally ill Note that taxpayers with travel plans accepted and is being timely paid; an
[IRM paras. 5.8.1.3(5); 5.8.3.18, 5.8.4.26]. scheduled for more than 45 days in the amended return, penalty abatement request,
A mere wish to avoid certification, however, future do not qualify for expedited or audit reconsideration eliminates the bal-
is not one of these circumstances. decertification. ance due; the tax debt is due to identity
There may be situations in which a tax- theft; there is a disaster zone freeze; or the
Reversal of Certification payer residing outside of the United taxpayer is in bankruptcy [Memorandum
IRC section 7345 contains procedures States has an urgent need for a passport for Taxpayer Advocate Service Employees,
for the reversal or decertification of the cer- without having imminent travel plans. TAS-13-0418-0001 (April 26, 2018),
tification of a seriously delinquent tax debt. The IRS will give expedited consideration Appendix A]. Situations which will require
The IRS must notify the State Department to taxpayers who report that they have an manual certification include amended
if the certification is determined to be erro- urgent need for decertification and meet returns and penalty abatement (other than
neous, if the taxpayer has paid the debt in the other requirements. Other than the first time abatement) that reduce the total
full (not just a partial payment to reduce exceptions discussed above, however, unpaid assessments below the threshold for
the liability below the threshold), or if the the only other potential exception is that certification, and situations where the cer-
debt ceases to be a seriously delinquent tax the State Department may issue a pass- tification was erroneous and correction of
debt under any of the statutory or discre- port “in emergency circumstances or the error does not result in systemic posting
tionary exceptions [IRC section 7345(c)(1); for humanitarian reasons” [22 U.S.C. of the decertification.
Chief Counsel Notice 2018-005]. section 2714a(e)(1)(B)].
Although the taxpayer is required to The IRS is required to send notice of the Judicial Review of Certification or Failure
pay the entire amount certified before the reversal of the certification to the taxpayer to Reverse a Certification
IRS will reverse the certification, the IRS [IRC section 7345(d)]. The timing of the IRC section 7345 provides for judicial
will decertify the liability if it is reduced notice of the reversal depends on the reason review of the IRS’s certification, but not
below the threshold for certification for for it. If the reversal occurs because the tax before it takes effect. The taxpayer may
other reasons. For example, reduction in debt is fully paid or legally unenforceable, bring a civil action in U.S. District Court
tax due to the filing of a valid return or the IRS is not required to make the noti- or the Tax Court to determine whether the
amended return will cause decertification, fication until the date required for issuing certification was erroneous or whether the
but only after the return is processed and a certificate of release of the lien under IRC IRS has improperly failed to reverse the
posted (IRM para. 5.1.12.27.8). section 6325(a) [IRC section 7345(c) certification [IRC section 7345(d)]. Other

64 JULY 2018 / THE CPA JOURNAL