Passport in Peril?
Kevin Rego • December 22, 2022
The IRS and US Department of State are trying to get your attention, Mr. and Ms. Delinquent Taxpayer
Since early 2018, the IRS has been using a little known tax liability enforcement tool authorized under Internal Revenue Code 7345(a) to get the attention of taxpayers who owe money to the IRS but are not cooperating.
Section 7345(a) provides that if Treasury Department receives certification by the Commissioner that an individual has a seriously delinquent tax debt, such certification must be transmitted to the State Department for action with respect to denial, revocation, or limitation of a passport.
That's right---the IRS reports seriously delinquent taxpayers to the US Department of State who then take action against the taxpayer's passport status. What that effectively means is that the Department of State will generally deny an application for issuance or renewal of a passport from such individual, and may revoke or limit a passport previously issued to such individual. Apparently, the choice of action is up to them.
The definition of a “seriously delinquent tax debt” is an unpaid, legally enforceable, and assessed federal tax liability of an individual, greater than $50,000 (including tax, interest, and penalties indexed each year for inflation), and for which:
- A notice of federal tax lien has been filed under section 6323, and the taxpayer’s right to a hearing under section 6320 has been exhausted or lapsed; or
- A levy has been issued under section 6331.
The current debt amount as of 2022 is around $55,000 when adjusted for inflation.
The taxpayer will be notified that he/she is on the delinquent tax debt list by receipt of IRS Letter CP508-C. That letter explains the pending action against the taxpayer's passport status and gives them 30 days to respond. No response or no action to mitigate the situation will result in a certification to the US Department of State for action.
Who is NOT subject to the passport suspension/revocation? Taxpayer debt which is:
- A debt that is being timely paid under an IRS-approved installment agreement;
- A debt that is being timely paid under an offer in compromise accepted by the IRS;
- A debt that is being timely paid under the terms of a settlement agreement with the Department of Justice;
- A debt in connection with a levy for which collection is suspended because of a request for a due process hearing (or because such a request is pending) under section 6330; and
- A debt for which collection is suspended because the individual made an innocent spouse election or the individual requested innocent spouse relief.
Bottom line---these even if your tax debt exceeds the $55,000, if you are WORKING with the IRS to resolve your debt, they will likely leave your passport alone. Ignore the IRS and you may find your next vacation will be limited to the United States, no Bon Voyage!
San Mateo, CA I usually write about IRS tax problems since my practice centers around IRS collection and audit resolution , however every once in a while some interesting tax and financial related items come across my desk that I think are worth mentioning. If you have kids in high school looking ahead to college or kids in college looking at graduate school and you are wondering--how will I pay for this---this is article is for you. Student Loan Changes are in effect: Starting this July, the way students borrow money for college and graduate school is getting a significant overhaul. New rules will reshape borrowing limits, phase out certain loan types entirely, and for the first time, draw a sharper line between graduate and professional degrees when deciding how much a student can take on. Most of these changes kick in July 1, 2026, and affect federal loans first disbursed for the 2026–2027 academic year. If your kids are already in school, take a breath — many of these rules won't touch you. They're largely aimed at incoming students. Undergraduate borrowing? Nothing changes. For all the commotion surrounding these program reforms, undergraduate loan limits are staying exactly where they've been. Federal Direct Loans remain the main-stay of student aid for four-year programs, and the annual caps haven't moved. Here's a basic breakdown: Dependent students can borrow up to $5,500 in their first year, $6,500 in their second, and $7,500 annually after that. Independent students get more room — $9,500 in year one, $10,500 in year two, and $12,500 per year from there on. Lifetime caps sit at $31,000 for dependent students and $57,500 for independent ones. These numbers haven't budged in years, and since they're not tied to inflation, they now cover a noticeably smaller slice of what college actually costs than they once did. Dependent or Independent--What does that mean: Whether a student qualifies as "independent" matters quite a bit here, since that status unlocks higher limits. Under Section 480(d) of the Higher Education Act, you're considered independent if you're 24 or older, married, have dependents of your own, are enrolled in a graduate or professional program, have served in the military, are an emancipated minor or ward of the court, grew up in foster care, or are a homeless youth — among a few other qualifying circumstances. Because loans rarely cover the full bill anyway, most undergraduates piece together the rest through scholarships, grants, family contributions, 529 savings plans, part-time jobs, and sometimes Parent PLUS or private loans. Graduate students are facing the biggest changes. This is where the 2026 reforms really have a bite. Under the old system, graduate students could stack Direct Loans on top of Graduate PLUS Loans, which allowed borrowing all the way up to the cost of attendance — tuition, housing, food, everything. That flexibility is gone . Graduate PLUS Loans are being eliminated for new borrowers. Going forward, most graduate students will be limited to $20,500 per year, with a lifetime cap of $100,000 for all graduate borrowing. There is an exception carved out for a narrow tier of professional degrees: medicine, dentistry, law, and a few others. Those students can borrow up to $50,000 per year and $200,000 over the course of their studies. Worth noting: unlike before, these new caps aren't pegged to the cost of attendance. That means federal loans may no longer stretch far enough to cover both tuition and living expenses, leaving students to find other ways to fill the gap. Families borrowing through Parent PLUS loans will feel it too. The changes don't stop with students. Parent PLUS loans — long used as an additional source of college funds— are also getting capped. Where parents could previously borrow up to the full cost of attendance, they'll now be limited to $20,000 per year per child, with a lifetime ceiling of $65,000 per student. Since these loans land on the parent's credit and the parent is responsible for repayment, families who've relied heavily on Parent PLUS to afford higher-cost schools may find themselves rethinking their options. Scholarships, savings, and more affordable educational pathways are likely to become a bigger part of the conversation going forward. Have questions about how this affects your family? These changes may not show up on a tax return, but they're very much a part of your financial picture. Where loans in the past have made up a large part of financing college tuition and living expenses, new changes may limit those options. Remember to always verify your circumstances with a college financial planner or college advisor. These are general provisions designed as an overview of changes. Your individual circumstances may vary. Kevin Rego Law Office of Kevin Rego 650.933.5222 Disclaimer: The information provided is intended to provide a general overview of the topic presented at the time of publication. Tax laws change and you should always consult a tax professional for the latest tax law. This article is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in any way establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.
A recent U.S. Tax Court case is a cautionary tale every taxpayer who takes a charitable donation deduction on their annual tax return needs to hear. A couple donated a piece of land worth thousands of dollars to their city in the state of Utah. They had letters, a deed, city council records — a whole file of documents showing the donation was legitimate. They filed their tax return with the donation deduction and that is when things went haywire. The IRS disallowed the entire deduction. In subsequent litigation challenging the disallowance, the US Tax Court agreed with the IRS. Not because the donation was not real. Not because the land had no value. But because the paperwork did not say the right things. Here is what you need to know to protect your deduction. The Magic Number Is $250 If your charitable contribution — cash or property — is $250 or more, the IRS requires a Contemporaneous Written Acknowledgment (CWA) from the charity. “Contemporaneous” means you must have this document (1) on or before the date you file your return or (2) the due date of the tax return — whichever is earlier. Without it, if your charitable deduction is challenged by the IRS, your deduction is likely gone. What the Letter MUST Contain Under I.R.C. § 170(f)(8)(B), the CWA must include all three of the following: A description of what you donated. For cash, state the dollar amount. For property, describe what was received by the charity. The charity does not need to state the value — but they must describe what they got from you. An affirmative statement about whether the charity gave you anything in return for the donation. This is the one that trips up ALOT of taxpayers. If the charity gave you nothing — no dinner, no tickets, no tote bag — the letter must say so explicitly. Words like “donation” or "thank you" or "acknowlegement" or “gift” are not enough. The required language is simple: “No goods or services, in whole or in part, were provided in exchange for this contribution.” Silence on this point will cost you your deduction. If the charity DID give you something in return for the donation, it must be described and include an estimate of the value of what you received. For example: “Two gala dinner tickets with an estimated fair market value of $150 were provided in return for your charitable donation of $500”. For contributions to religious organizations or houses of worship, a statement to the effect of such goods or services consist solely of "intangible religious benefits" is often appropriate in this part. Close Is Not Good Enough In many areas of tax law there is a concept called substantial compliance — meaning if you got close enough, the IRS would cut you some slack. That doctrine does not apply here. The CWA requirements are strict, and a deduction will be disallowed in its entirety if the letter falls short — even if the donation was completely genuine and legitimate, like our couple from Utah. Before You File — Make sure everything is in order If you have made a significant charitable contribution and are not certain your acknowledgment letter meets the IRS requirements, contact the qualified charity before you file. It is far easier to get a revised or re-worded letter from the charity before your return goes in than to fight the IRS afterwards. If you've received an IRS letter or notice that and you're not sure what to do next, contact my office today for a consultation. Kevin Rego Law Office of Kevin Rego 650.933.5222 Disclaimer: The information provided is intended to provide a general overview of the topic presented at the time of publication. Tax laws change and you should always consult a tax professional for the latest tax law. This article is not intended to be a legal interpretation of your individual tax or legal situation. If there is a conflict between the information provided and any legal authority implementing or interpreting the topic, the legal authority shall prevail. Always seek legal advice from a licensed attorney. This article does not in any way establish an attorney-client relationship. That relationship can only be accomplished with both parties signing a mutual, written agreement.