Did you just receive an IRS Notice CP508C? If so, it’s a sign that your tax debt has reached a serious level. And financial consequences aside, you’re now at risk of losing something that you might take for granted–your passport.
Chances are, you have many questions right now. You may be feeling completely overwhelmed about the situation and how to handle your tax debt. And although calling our tax attorneys to discuss how we might help is a good idea, in the meantime, here’s what you should know about IRS CP508C letters and how you can protect your passport.
What is a CP508C Notice?
A CP508C Notice is a warning letter from the IRS declaring that your tax debt is “seriously delinquent.” In other words, you have significant tax debt and the IRS wants to incentivize you to pay.
What is seriously delinquent tax debt?
The IRS considers a tax debt “seriously delinquent” if:
- It is an individual’s federal tax debt, which includes interest and penalties, totaling over $62,000 (adjusted yearly for inflation)
- The IRS has exhausted other means of collecting the debt
If you’re a business owner, such debt includes any Federal tax debt you are personally liable for.
IRS CP508C Notice deadline
You only have 30 days from the date of the CP508C Notice to either:
- Pay the tax debt in full
- Arrange a payment plan
- Dispute the tax debt
Missed the deadline? Give us a call and we’ll explain your options for approaching the IRS or the State Department.
Why did I get an IRS CP508C Notice?
Chances are, this letter won’t come as a surprise, since the IRS will have sent several other notices beforehand. But that being said, let’s confirm the reasons why you might have received IRS Notice CP508C.
- You have seriously delinquent federal tax debt
- Despite the IRS sending various notices, you have not paid the debt or set up a payment plan
- The IRS has already issued a Notice of Federal Tax Lien, and your administrative rights regarding the lien have been exhausted or lapsed
- The IRS has attempted to levy your wages, bank account, or property
You’ll only receive a CP508C if the IRS has already exhausted its legal options for collecting the debt, and restricting your passport is the only option left.
Is all tax debt considered?
No. The IRS won’t tell the State Department about certain tax debts, including:
- Child support
- Payment plans already agreed or pending with the IRS (including installment agreements and Offers in Compromise)
- Debts suspended after requesting innocent spouse relief
- Tax debt for which you’ve entered Currently Non Collectible (CNC) status
This means that you can, technically, have tax debt which puts you over the “seriously delinquent” threshold, but you’re not at risk of losing your passport. Only qualifying federal tax debts put you at risk.
What happens after I receive an IRS Notice CP508C?
Well, unfortunately, the IRS is already moving against you. By the time you receive Notice CP508C, the IRS has already certified your debt as seriously delinquent to the State Department. Essentially, here’s what’s happening.
- The IRS contacts the State Department under Fixing America’s Surface Transportation Act (FAST). FAST gives the State Department the right to refuse an application for a new passport and to deny a passport renewal application.
- If you are certified as seriously delinquent and you apply for a passport, the State Department keeps your application open for 90 days. This gives you time to pay the debt, challenge the debt, or arrange a payment plan.
- In some scenarios, the State Department may revoke your existing passport.
How to get your passport back after receiving an IRS CP508C
So, you’ve received a Notice CP508C from the IRS and now you don’t have a passport. What happens next–what are your options for getting your passport back and clearing your tax debt? While every situation is unique, there are five main ways you might proceed.
1. Pay your tax bill in full
This is the easiest option, if you can afford it. Simply pay online or by check. Be sure you can actually afford the full bill, though. Otherwise, you could find yourself in further financial difficulties.
Once the IRS processes payment, it notifies the State Department that you’re no longer seriously delinquent. This starts what’s known as a reversal of your certification, which can take a few weeks to complete.
2. Arrange a payment plan
The good news is that even if you can’t pay the full bill, you can propose a payment plan, or installment agreement, with the IRS.
Payment plans help make your tax debt more manageable. They can also help you from incurring further difficulty, since you’re not stretching yourself too much to repay the debt.
You can apply by calling the number on your IRS Notice CP508C or by completing Form 9465 (Installment Agreement Request). Be prepared to show financial information proving you can’t afford to pay the full amount.
Once your debt falls under the “seriously delinquent” threshold, the IRS will notify the State Department and reverse your certification. So, even if you still owe money, your passport won’t be at risk once you pay the debt down.
3. Negotiate an Offer in Compromise (OIC)
An Offer in Compromise means that you agree to pay less than you owe. Seeking an OIC could be an option if you genuinely can’t afford to pay your tax bill but you want to settle the debt quickly.
OICs are hard to get. This is unsurprising–you’re essentially paying less tax than you owe, which isn’t popular with the IRS! Many of our clients have settled for pennies on the dollar, reducing their tax debt by thousands or even millions of dollars.
To achieve these types of results, you’ll need to follow a precise IRS formula to prove that you can’t pay the tax debt. And even then, there’s no guarantee the IRS will grant the OIC. Our team will be glad to help you understand your options if you’re in financial hardship and want to explore reducing your debt.
4. Dispute the tax bill
Don’t agree with the amount owed? You can always dispute the bill and the CP508C. Call the number on your letter and be prepared to show any evidence which supports your claim.
IRS negotiations can be stressful–not to mention complex. To stand the best chance of disputing your tax bill, reach out to an experienced IRS attorney for help.
5. Challenge “seriously delinquent” status
If you’ve already made payments toward the debt, or you believe your debt falls under the threshold for seriously delinquent status, you can call the toll-free number on the notice to dispute your status. You’ll need to show proof of payment to have the certification reversed.
Unsure which option is right for you? Given how serious an IRS Notice CP508C can be, you might want to contact a tax lawyer for advice before you take any action. The rules and procedures you’re dealing with here are strict and inflexible. A lawyer can help you decide which path to take based on what you can afford to repay.
Reversal of a CP508C
Even if you can’t apply for a passport–or your passport is rescinded–this is unlikely to be permanent. The IRS seeks a reversal of the seriously delinquent status if:
- You pay the tax debt
- You successfully prove that the debt is wrong
- You agree to a payment plan or OIC with the IRS
Typically, the IRS seeks a reversal within 30 days. It can then take the State Department up to 21 days to process the reversal.
Once the IRS notifies the State Department that the debt is no longer delinquent, it sends you out a Form CP508R to confirm that the reversal is in motion.
IRS CP508C Notice and travel restrictions: Frequently asked questions
If you have travel plans and you receive a CP508C from the IRS, you probably have a few questions. To help, here are the answers to questions we commonly get about CP508Cs and travel restrictions.
What if I have vacation plans?
Unfortunately, unless you have a valid passport, you can’t travel overseas. However, you can ask the IRS to “speed up” the reversal process if:
- You have travel plans within the next 45 days
- You can pay the debt or arrange a payment plan, or you successfully challenged the debt
You’ll need proof of travel within the next 45 days before the IRS will agree to speed up the reversal process. But if successful, you could shorten the processing time for reversing certification requests. Rather than waiting 30 days, you might only wait 21 days.
What if I need my passport for work?
Even if you need a valid passport for work, you need to take steps to manage your tax situation with the IRS. So, whether you need a valid passport for ID purposes, or for work-related travel, the only way to resolve the situation is to negotiate with the IRS.
Can I return home from overseas?
Yes. Typically, the State Department will either:
- Issue a temporary, limited passport to let you return home; or
- Limit your passport to returning home to the US only.
That said, there’s no guarantee that the State Department will grant a temporary or restricted passport. That’s why, before you contact the State Department or the IRS, it’s a good idea to give an experienced attorney a call.
What should I do if I receive a CP508C Notice?
First, don’t panic! A CP508C is intimidating, but all is not lost. You have options for keeping your passport, or for ensuring you can apply for a new one. To resolve matters as quickly as possible, take the following steps.
- Read the IRS CP508C Notice carefully. Ensure you understand how much the IRS claims that you owe and which tax year(s) this notice applies to.
- Be clear about what you can afford. Paying too much could leave you struggling financially. Over time, this could mean more IRS debt!
- Contact the IRS using the toll-free number on your letter. Stay calm and be transparent about your situation. The IRS is more likely to negotiate with you if you’re upfront and honest.
- Hire a tax lawyer to explain your options and negotiate on your behalf. They may even be able to reduce your overall tax debt through an Offer in Compromise, if it’s suitable in your case.
- Consider working with a tax lawyer, or tax team, to help manage your finances, and your tax liabilities, for the future. After all, clearing your tax debt is not just about the here and now. It’s about avoiding debt building up again.
Schedule your free consultation with experienced tax lawyers
It’s daunting to receive any notice from the IRS, let alone an IRS CP508C. But don’t feel like you need to face the challenges ahead alone. At Gordon Law, we’re here to assist. Our experienced tax attorneys have negotiated with the IRS countless times on behalf of our clients, so we know how to approach IRS officials and how to present the strongest case in your favor.
Whether it’s proposing a payment plan or helping you get your passport back, we’re only a phone call away. To learn more about our tax debt resolution services, or to find out more about responding to an IRS CP508C notice, call (847) 580-1279 today to schedule a free, no-obligation first meeting.
