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it does provide a fair amount of detail on whose tax debts the IRS has targeted for passport revocation, how many have been revoked, and what has happened after the sending of the revocation.
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:
|Number of Taxpayers
|Percentage of Decertifications
|Pending Installment Agreement
|Pending Offer in Compromise
|Pending Full Pay Adjustment
|Accepted Offer in Compromise
|Total of Compliant Taxpayers
|Currently Not Collectible Hardship
|Total of Noncompliant Taxpayers
|Total of All Decertifications
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.