What is seriously delinquent debt ?
IRC 7345 (b) defines it to mean
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 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
In simple term, if a tax demand is created on you by an assessment by IRS for more than $50,000 in respect of which IRS authority has already notified lien, you can be notifed to the State Demartment as an Individual having Seriously Delinquent Debt. Then consequance as per section 7345 of Internal Revenue Code may follow.
What Are Exceptions under Section 7345 ?
It has been provided that even if you have a tax debt of $50,000 or more , you may still be not regarded as seriously delinquent tax debtor in following circumstances :
- You have an installment agreement entered into with the IRS and you are paying debt timely or
- Tax debt is being paid in a timely manner under an offer in compromise accepted by the IRS or under a settlement agreement entered into with the Justice Department
- For which a collection due process hearing is timely requested in connection with a levy to collect the debt
- For which collection has been suspended because a request for innocent spouse relief under IRC § 6015 has been made
What happens when IRS notifies State Department you as Delinquent Tax Debtor?
As per the provision, IRS will have to notifiy as per section 7345(d) of IRC that you are being notified to State Department as delinquent tax debtor. You get 90 days time limit before State Depart takes an action to revoke your passport for following steps , if you wish
- Resolve any erroneous certification issues
- Make full payment of the tax debt
- Enter into an agreement for satisfactory payment of tax debt with the IRS
Can you approach court against the deinquent tax debt certification ?
Yes, Section 7345(e) provides that Individual may challenge if the certification by Commissoner was correct in his case. The provision is clear on this and provides as under
(e) Judicial review of certification
(1) In general
After the Commissioner notifies an individual under subsection (d), the taxpayer may bring a civil action against the United States in a district court of the United States or the Tax Court to determine whether the certification was erroneous or whether the Commissioner has failed to reverse the certification.
If the court determines that such certification was erroneous, then the court may order the Secretary to notify the Secretary of State that such certification was erroneous.
Can IRS withdraw the delinquent debt certification ?
Yes, in following circumstances, the certification can be withdrawn
- IRS grants you an installment allowing you to pay the debt over time.
- You offer a compromise to satisfy the debt and IRS agrees to it.
- The Justice Department agrees with you and enters into a settlement agreement to satisfy the debt.
- Collection is suspended because you request innocent spouse relief under IRC § 6015.
- You make a timely request for a collection due process hearing in connection with a levy to collect the debt.