According to the IRS, over 360,000 Americans could have their passport privileges revoked and new applications denied as a result of their ongoing tax situation. While you generally won’t go to jail or lose your home for unpaid taxes, you can easily lose your international travel privileges if the IRS certifies your tax debt as seriously delinquent.
If the federal tax agency decides to pursue this course of action, it will send out a CP508C notice. Have you recently received this important IRS letter? Then, it’s critical to understand exactly what the letter means, how you should respond to it, and the steps you can take to get back in good standing with the IRS.
Learn more about delinquent tax debts and how they could cost you your passport below.
What is IRS Notice CP508C?
A CP508C is an official letter that you might receive from the IRS. The letter officially categorizes your ongoing tax debt situation as “seriously delinquent.” As a result of this classification, your details will be provided to the U.S. Department of State as outlined in the Internal Revenue Code Section 7345. If that happens, you may lose your passport, and you will not be able to get a new one until you resolve the issue.
As of 2024, tax debt is considered seriously delinquent when you have a tax balance that exceeds $62,000. This balance includes any assessed penalties and accumulated interest, so you might receive a CP508C if you owed a smaller balance but have let it accumulate interest and penalties over the years.
Seriously delinquent taxes may include individual income tax debt, Trust Fund Recovery penalties, civil penalties, and business taxes that taxpayers are personally liable for. Note that this number was originally $50,000, but it has been indexed to inflation and increases annually.
On top of these requirements, the IRS must have already filed a Notice of a Federal Tax Lien against the taxpayer in an attempt to resolve the debt, meaning the IRS must have already attempted to use all the administrative remedies available to collect on the debt.
If you receive this notice, it’s important to read it thoroughly to understand exactly what’s being outlined. Deciding to disregard the letter and not take action has consequences, including the potential revocation of your passport.
Why You Received Notice CP508C
An IRS notice CP508C letter shouldn’t come as a surprise to you if you’re on the receiving end. That’s because the CP508C is typically only utilized after several other enforcement measures have already been pursued. By the time you receive this letter, you will likely have already received several other letters from the IRS outlining your tax situation, the amount of your unpaid debt, and the potential consequences you might face.
When unaddressed, small tax matters can become massive tax problems and seemingly insurmountable debts. Once you reach the point of receiving a CP508C notice, it’s no longer a small matter of unfiled taxes or owing a small sum to the IRS. This notice is intended to inform you that your tax situation has reached the point of “serious delinquency.”
You received this notice because the IRS intends to tell the State Department to take away your U.S. government-issued passport. This can immediately restrict your international travel. You will not be able to get approved for a new passport until you resolve your tax situation. However, if you are out of the country, you will, of course, be allowed to return before the government takes your passport.
Consequences of Notice CP508C
If you don’t respond to this letter, you may lose your passport, as noted above. The IRS will also continue to add penalties and interest to your account, and if desired, the IRS may move forward with levies and other collection efforts. However, if you respond before the deadline on the letter, you may be able to get the situation resolved before you lose your passport.
Generally, the only way to stop collection efforts and get your IRS passport restriction removed is to get back in good standing with the IRS. To do so, you’ll need to respond to the letter and come to an agreement about resolving your debt.
The restriction will be reversed when the tax debt is satisfied or is no longer legally enforceable. The restriction will also be reversed if the tax debt is no longer seriously delinquent. For example, if you make a payment to get your debt under the seriously delinquent level, you may be able to get your passport back. Similarly, you may get your passport back if the Collection Statute expires on the debt and the IRS can no longer legally pursue collections.
Steps to Take After Receiving Notice CP508C
Have you recently received notice CP508C? If you need your U.S. passport, it’s crucial for you to take specific steps to ensure that the revocation doesn’t proceed. Below, we’ll go over what to do step-by-step to protect your rights.
Fully Review the Letter
First, you need to fully review the letter. Verify that all the information in the letter is correct, including the amount of tax debt due, any penalties listed on the letter, and the due date of your tax debt. As you go through the letter, pay attention to the details that explain what you need to do to prevent the revocation of your passport.
Sometimes, the information in the letter isn’t accurate. If you disagree with the details of the letter, you have the right to contact the IRS within 30 days of receiving the notice or file a petition in the United States Tax Court.
Know Your Options
Next, you need to consider your options. When you owe a massive tax debt, you have multiple options for relief. For one, you could pay off the entire amount you owe in one lump sum. This large payment should include all the penalties, accumulated interest, and fees on your account. If you can do so, this step will immediately resolve your situation with the IRS and remove any restrictions on your passport.
Another option you have is to file a petition in the United States Tax Court to dispute the certification. An experienced tax attorney can assist in preparing this petition for you and negotiating on your behalf.
You can also apply for relief through the innocent spouse program if applicable to your situation.
One more option is to consider arranging a payment plan with the IRS. IRS installment agreements allow you to pay off your tax debt over time while the agency agrees to stop pursuing collection efforts. This type of arrangement is usually based on your financial need, so expect to prove to the IRS what type of financial shape you’re in.
Depending on your situation, you might also be able to consider different options that will reduce the overall amount you owe. While not everyone is eligible, penalty abatement can help you remove penalties and fees from your tax debt, while an offer in compromise can help you negotiate your tax debt down in exchange for making a lump sum payment.
Finally, you have the option of doing nothing. If you do not respond to the letter, then your passport could be revoked, and you won’t be able to get a new one until you address your tax situation.
Consider Your Circumstances
Next, you need to consider your specific circumstances and ability to pay. The options you have available to you will depend on how much you owe the IRS but also on your finances. For instance, you may not be eligible for a payment plan if the IRS determines that you can pay in full in other ways.
The IRS might also deny certain types of relief if you haven’t remained in good standing with the agency, you have other tax returns due, or you have no valid reason for delaying your payments.
Consult with a Tax Professional
One of your best options is to seek out high-quality tax representation. Consulting with a tax professional can help you decide how to best handle your debt. Your attorney will make sure you’re fully informed regarding all your options, and they’ll help you weigh out your specific circumstances to come up with a solution that works best for everyone involved.
The right tax attorney should have experience handling passport revocations, CP508C letters, and other tax delinquency issues. The attorney’s firm should have generally positive past reviews, and the firm should also have solid case results that back up their claims of experience.
How to Avoid Future IRS Collection Notices
When your tax situation has become dire enough that the IRS sends out a CP508C notice, you know you’ve procrastinated on resolving your tax situation for far too long. That said, once you do finally address your situation and get back in good standing with the IRS, you’ll want to make it a goal to ensure you don’t fall into a similar situation again.
You can avoid getting notices like a CP508C in the future by taking steps to stay on top of your tax situation. For one, follow the best practices when it comes to filing and paying your taxes. Consider using an online electronic filing service, as going digital often results in fewer errors. You should also try to set aside money that will cover any tax bills you’re likely to receive.
If you have questions about tax regulations, how to best prepare for tax season, or how to handle unique tax situations, you should consider consulting with a tax professional. Taking these proactive steps will help you from falling into another tax debt hole again in the future.
Do You Have More Tax Questions?
When you receive an IRS notice CP508C letter in the mail, it’s important to take the proper steps if you want to protect your rights to international travel. If you fail to do anything to improve your tax standing, you probably won’t be able to use your passport or have a new passport application approved.
The good news is that there are always options, even when your tax situation seems bleak. When you’ve fallen behind on your tax obligations, you might have the option of agreeing to a payment plan, reducing your overall tax burden, or getting penalties removed.
To learn more about all the resolution options available to you based on your specific financial situation, get in touch with a legal tax professional. The right tax expert will assist you in determining your best course of action.
At Wiggam Law, our experienced tax resolution attorneys are ready to help you get in good standing with the IRS. To learn more about your tax debt resolution options, schedule a consultation with our team now.