The term seriously delinquent tax debt is defined under section 7345(1)(b) of 26 US Code as under :
the term “seriously delinquent tax debt” means 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 pursuant to section 6323 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.
So , a federal tax debt which fulfils the conditions mentioned in Section 7345(1)(b) , may be declared by The IRS as a seriously delinquent tax debt.
The $50,000 threshold tax debt includes both principal tax owed plus interest and penalties, but does not include amounts for which a collection alternative has been established, such as an installment agreement or an offer in compromise.
The IRS has a specific procedure for certifying a tax debt as seriously delinquent. This involves notifying the taxpayer by certified mail of the certification and informing them of their right to request a hearing with the Office of Appeals.
Consequences of Certification as Seriously Delinquent Tax Debt
The IRS will also provide the State Department with notice of the certification, and the State Department will generally deny the taxpayer’s passport application or renewal or may revoke their passport.
The most immediate consequence is the potential denial or revocation of passport by the State Department. This can limit a taxpayer’s ability to travel internationally for work or personal reasons, which can have serious ramifications for their career, personal relationships, and quality of life.
What Debts can not be Declared as Seriously Delinquent Tax Debt ?
Seriously delinquent tax debt does not include debts collected by the IRS such as the FBAR Penalty and Child Support.In addition, if a taxpayer is serving combat zone or participating in a contingency operation , in certification procedure for declaring the tax debt as seriously delinquent debt shall be postponed .
There are certain types of tax debt which needs to be removed from being included in the seriously delinquent tax debt even if it meets the above criteria , in following situations
- Debts which are being paid in under an installment agreement entered into with the IRS or under an offer in compromise program or a settlement agreement entered into with the Justice Department.
- Tax debt for which a collection due process hearing is timely requested.
- For which collection has been suspended because a request for innocent spouse relief under IRC § 6015 has been made.