It’s the season for annual reports from TIGTA. In 1998, Congress ordered TIGTA to create annual reports on several aspects of IRS operations. In addition to those mandated reports, many of which would benefit from a longer timeline at this point, TIGTA also performs regular audits to check on IRS performance. We will be writing on some of the annual reports as we have done in the past. On September 19, 2019, it issued a report on passport revocation. While this may not have many surprises, it does provide a fair amount of detail on whose tax debts the IRS has targeted for passport revocation, how many have been revoked, and what has happened after the sending of the revocation.
read more...As of December 20, 2018, the IRS had certified 306,988 taxpayers for passport revocation. Of those individuals, by that same date the IRS had decertified 68,764 of the cases, or not quite 25%. By May 17, 2019, the IRS had decertified 99,867 taxpayers. Before getting too excited about all of the money the IRS must have collected in order to decertify this many taxpayers, you must look at the list TIGTA created of the reasons for decertification. Here is the breakdown of the bases for decertification:
| Decertification Reason | Number of Taxpayers | Percentage of Decertifications |
| Pending Installment Agreement | 18,516 | 19% |
| Installment Agreement | 8,596 | 9% |
| Full Paid | 6,815 | 7% |
| Pending Offer in Compromise | 5,887 | 6% |
| Pending Full Pay Adjustment | 224 | <1% |
| Accepted Offer in Compromise | 24 | <1% |
| Total of Compliant Taxpayers | 40,062 | 40% |
| Disaster Zone | 27,137 | 27% |
| CSED Expiration | 11,507 | 12% |
| Currently Not Collectible Hardship | 8,716 | 9% |
| Bankruptcy | 3,597 | 4% |
| Deceased taxpayer | 2,696 | 3% |
| CDP Hearing | 2,262 | 2% |
| Identity Theft | 1,663 | 2% |
| Threshold18 | 1,045 | 1% |
| Manual Block/Other | 472 | <1% |
| Innocent Spouse | 438 | <1% |
| Erroneous Decertification | 244 | <1% |
| Combat Zone | 28 | <1% |
| Total of Noncompliant Taxpayers | 59,805 | 60% |
| Total of All Decertifications | 99,867 | 100% |
Source: Passport Program Office.
About 40% of the decertifications resulted from actions TIGTA described as compliance, while the remaining 60% resulted from the statutory or administrative basis for recertification other than compliance. Even within the compliance category, pending or actual installment agreements comprise, by far, the largest number of taxpayers coming into compliance. So, the revocation of the passports of these taxpayers did not, as of yet, result in many fully paid accounts – only 6,815 of the almost 100,000 cases decertified (or looking at it another way only 6,815 of the over 300,000 taxpayers sent for revocation. This does not seem like much bang for the passport revocation buck, but the TIGTA report does not approach its investigation in this manner.
We are not provided with how much it has cost the IRS to implement this collection tool nor are we provided with the dollars collected at this point. Without that type of analysis, it is not possible to draw conclusions on the success of the revocation legislation. TIGTA does say that the revocation program has brought many taxpayers back into payment compliance and has resulted in hundreds of millions in revenue. That sounds positive from an enforcement point of view.
The biggest reason for decertifying the revocation surprised me. Almost 27% of the decertifications resulted from applying the disaster zone rules. I do not know enough about how many disasters existed. I would not have expected this many decertifications for this reason, but they may just reflect my ignorance of the coverage of the disaster zones. The second largest reason, CSED expiration, did not surprise me. The chart gives a great picture of what happens once the IRS revokes someone’s passport. The most likely thing to happen, which the chart shows by negative implication, is the taxpayer does not address the revocation and, I assume, does not care or feels powerless to do anything.
Of course, the report finds that the IRS certified some taxpayers for revocation that it should not have. It identifies most of the problems in this area as a result of not correctly calculating the impact of the statute of limitations on collection.
The other interesting part of the report is the discussion of who the IRS identified for revocation in the first phase of the program and who it has identified next. The first phase targeted taxpayers with “simple” tax debt in the IRS parlance. The IRS considers simple debt as debt resulting from “filing single, head of household, married filing separately, or married filing jointly status for which the filing status of the primary and secondary filers is consistent from tax year to tax year.”
Now the IRS has started looking at taxpayers with complex debt. It considers complex debt as aggregate debt from a variety of filing statuses “on different tax modules with an outstanding tax liability.” As of March 22, 2019, the IRS had identified 69,460 taxpayers with complex debt of more than $52,000. The report says that the IRS expects to send notices for these taxpayers starting in September 2019.
The report provides an interesting window into the passport program. Much more data will inevitably be available in the future. My limited view of the program suggests that it highly motivates some individuals to come forward and work with the IRS in situations in which they had not previously done. Because the program limits constitutional rights, I hope that Congress takes a hard look at its success to ensure that increased collection justifies the limitation of travel rights of some.
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Leslie Book
Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law. Read More…
Keith Fogg
T. Keith Fogg is a Clinical Professor of Law at Harvard Law School where he started a tax clinic in 2015. Prior to joining the faculty at Harvard, he began his academic career at Villanova Law School in 2007 after working for over 30 years with the Office of Chief Counsel, IRS. Read More…
Christine Speidel
Christine Speidel is Associate Professor and Director of the Federal Tax Clinic at Villanova University Charles Widger School of Law. Prior to her appointment at Villanova she practiced law at Vermont Legal Aid, Inc. At Vermont Legal Aid Christine directed the Vermont Low-Income Taxpayer Clinic and was a staff attorney for Vermont Legal Aid's Office of the Health Care Advocate. Read More…
Stephen Olsen
Stephen J. Olsen’s practice includes tax planning and controversy matters for individuals, businesses and exempt entities for the law firm Gawthrop Greenwood, PC.
Nina Olson
Nina E. Olson is the Executive Director of the Center for Taxpayer Rights, a 501(c)(3) organization dedicated to advancing taxpayer rights in the US and internationally. She served as the National Taxpayer Advocate from March 2001 through July 2019. Read More…
Samantha Galvin
Samantha Galvin is a Clinical Professor of Law and the Director of the Federal Tax Clinic at Loyola University Chicago. She previously taught and directed the LITC at the University of Denver for more than nine years. Professor Galvin has taught tax controversy representation, individual income tax, and tax research and writing. In the FTC, she teaches, supervises and assists students representing low income taxpayers with controversy and collection issues. Read More…
Caleb Smith
Caleb Smith is Associate Clinical Professor and the Director of the Ronald M. Mankoff Tax Clinic at the University of Minnesota Law School. Caleb has worked at Low-Income Taxpayer Clinics on both coasts and the Midwest, most recently completing a fellowship at Harvard Law School's Federal Tax Clinic. Prior to law school Caleb was the Tax Program Manager at Minnesota's largest Volunteer Income Tax Assistance organization, where he continues to remain engaged as an instructor and volunteer today. Read More…
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IRS does not know if a taxpayer has a passport or intends to apply for one, so it sends a list to the State Department of everyone who may be subject to the law. What we need now is a report on what the State Department does with the list. More than 40% of Americans hold current passports, but that means most of the 388,701 “certified” taxpayers may not be particularly concerned about this program and much of the $961 million collected from them was not motivated by the threat of travel restrictions. As the report points out, the debt still owed by those not in compliance is almost $50 billion.
Suppose a married couple plans to file a 2018 return tomorrow, the extended due date. The balance due is $80,000, which they don’t have. Filing separately they each would owe $42,000. Is it malpractice for a practitioner not to advise them that filing separate returns might protect both of them from passport denial or revocation? They might want to amend to joint, later.
I too am puzzled by the high number of “disaster zone” waivers – apparently this IRS exception was added after the original list was issued. It is related to an “O” or “S” freeze on the taxpayer account, but I can’t find further information on these. How long do they last? When does the disaster zone end? There were 137 disaster declaration in 2017; 124 in 2018; and 83 so far this year. My initial thought was Puerto Rico and the Virgin Islands, but how many residents of those places owe IRS more than $52,000? But much of Texas and California is listed. The Farm Belt is our continuing national disaster, for natural and economic reasons, but mostly undeclared.