It’s The Year 2020, And The CP508C Letters Are Not Stopping. The Grace Periods Due To Coronavirus That The IRS Had Given Were Over 07/15/20. After the grace period for resolving seriously delinquent tax debt ended in July 15, 2020; the IRS has continued to certify federal tax defaulters for possible IRS passport revocation, denial, or imposing limitations on current passports in 2020.
The Grace Periods Due To Coronavirus That The IRS Had Given Were Over on 07/15/20
We have a thorough article telling you all about IRS Passport revocation.
This only occurs when the IRS has identified and verified that your internal federal tax debt meets the threshold for a “seriously delinquent” tax debt as stipulated in Section 7345 of the Internal Revenue Code. This section stipulates that once your tax debt has been identified as seriously delinquent, a CP508C Notice will be sent to you before forwarding your details to the US Department of State.
the Department of State can then, using IRS Data deny you a new passport, revoke the current one, or limit the passport to a return trip if you had traveled abroad, based on the information received from the IRS
A 90-Day Tax Extension, What Next?
March 20, 2020, shall be remembered . On this day, the Internal Revenue Service (IRS) issued a notice (Notice 2020-18) postponing both the submission of the federal tax debt as well as the filling of the federal income tax from April 15, 2020, to July 15, 2020.
According to the IRS Frequently Asked Questions (FAQs), the 90-day tax relief applied to anyone with a federal tax repayment or return due on April 15, 2020, including trusts, individuals, estates, and corporations, or any unincorporated business entity in the US.
No additional action was needed to receive this automatic extension. But what about IRS Passport Revocation ?
Tax penalties and interests would be reviewed as from July 16, 2020, and appropriate measures taken then.
Before the tax extension notice was issued on March 20, the Internal Revenue Service had processed over 67,998,000 individual returns and, at the same time, issued over 52,721,000 refunds.
IRS Uses Passports Revocation and “Seriously Delinquent” For Tax Debt Collection And Enforcement in 2020
Upon certification to the State Department by the secretary of Treasury for having seriously delinquent federal income task debt, you may not be able to apply for a new US passport. If the tax debt is not resolved, the current passport may be revoked.
If you’re certified when overseas, your passport may be limited for a one-way express return to the US before it becomes obsolete.
Therefore, one should apply for a new passport once their debt is resolved by the IRS.
If your passport is revoked, you will need to contact the IRS to resolve your tax debt before applying for a new one.
This helps to avoid passport denial or delayed passport processing.
Passport revocation is a tool for the IRS to motivate taxpayers clear their federal debt, thanks to the Fixing America’s Surface Transportation Act of 2015.
Under the FAST Act, “Seriously delinquent” tax debt refers to a legally enforceable tax debt amounting to over $52,000.
There are exceptions to taxpayers on active duty, innocent spouses, and those meeting their tax obligation alternatively. This can be through an installment agreement, settlement agreement, or an offer on compromise.
Things such as bankruptcy, identity theft, or living in a disaster zone can also attract a tax exception.
Audit Exposes Problems in the 2020 IRS Passport Revocation Procedures
Even though the tax revocation seemed a great bet for tax enforcement, a report issued by the Treasury Inspector General in charge of Tax Administration on September 19, 2019 pin-pointed some problems in the passport revocation procedures.
While the report termed the passport revocation system as “successful” the report pointed out three problems associated with the system.
First, changes in the system meant that there were some taxpayers certified before October 2018 despite having come into compliance or qualifying for a payment arrangement.
Secondly, the system lacked objective criteria for deciding on the best time for passport revocation in compliance with discretionary exemptions.
And lastly, the system led to inappropriate de-certification of taxpayer’s spouses even when their taxes remained collectible.
Out of the three problems, only the first problem was a bit concerning: it led to 19 taxpayers losing the right to renew or receive their passport despite communicating with IRS and meeting their tax obligations.
These unfortunate incidences resulted from several weeks of delay in certifying taxpayers having seriously delinquent federal tax debt.
In October 2018, the tax revocation program upgrade included a “Threshold check” that occurs immediately before the IRS sends certification. The check did eliminate not only delay but also the improper certification.
IRS Ramps-Up in 2020
The US IRS has ramped up its effort to increase revenue collection and tax compliance through the passport revocation system.
As of May 6, 2020, IRS had processed over 67,998,000 individual returns and issued 52,721,000 in a refund.
According to CNBC, by July 13, 2018, the IRS had notified over 400 000 taxpayers with federal tax debt.
As a result, the IRS received $11.5 million from 220 individuals at the end of June 2018. More than 1 400 more people have entered into a payment deal.
Subsequently, On a News release dated August 8, 2019 the IRS encouraged taxpayers with more than $52 000 unpaid tax debt to contact IRS to avoid passport denial or revocation.
By May 2019, the National Taxpayer Advocate’s report, IRS had sent short of 390 000 certifications. Some 100 000 had achieved de-certification.
During this time, $961 million got credited to taxpayers’ accounts, including a total of $550.7 in fully paid balances. As a result, over 40 000 taxpayers got certification for clearing their debt.
Below is a bar graph comparing the number of people notified, de-certifications in 2018 and 2019.
What will 2020 figures look like? We will have to wait a couple more months. Meanwhile, the CP508C letters continue.