Bloomberg Law spoke with Dianne C. Mehany concerning the fear some practitioners have that certain Americans could be stranded abroad under new State Department authority to revoke or deny passports to people who owe the U.S. government more than $50,000 in back taxes. For the full article, please visit Bloomberg Law's website (subscription required).
Excerpt taken from the article.
Challenges to Certification
Although the law allows taxpayers to challenge their certification as delinquent, one practitioner said they should exercise caution in doing so.
Dianne Mehany, a member of Caplin & Drysdale in the firm's international tax and tax controversy practice, said Dec. 7 that taxpayers in most cases can't challenge their underlying tax liability. They can only argue that their delinquency certification by the IRS to the State Department is wrong.
In a process where taxpayers already have very little chance to explain their circumstances, "by the time you've done this, there is not much room for appeal at all," Mehany, who practices in Caplin's Washington office, told Bloomberg BNA.
Before they go this route, taxpayers should contact a U.S. tax attorney, who may be able to help them learn whether they do have standing to challenge their liability, Mehany said.
According to the document signed by Obama, one way taxpayers can escape the burden of the law is to enter into an installment agreement or an offer in compromise with the IRS to try to get their taxes paid.
Brager said that this might be "the best and easiest thing" taxpayers can do to hang onto their passports, but both he and Caplin's Mehany said this is also an area where taxpayers should be cautious.
Mehany told Bloomberg BNA that some taxpayers may have standing to challenge the underlying liability, and that is something to consider before entering into an agreement with the IRS. In addition, they may be able to get penalties abated, but "you'll lose that if you go into an installment agreement," she said.
Limits for Some Taxpayers
However, she said, some taxpayers will have limited ability to do this because they haven't paid attention to their U.S. tax liability at all. "You can't just ignore everything, not do anything, and then just say ‘I don't owe the money,' " Mehany said.
Both Brager and Mehany said this, too, is an area where legal advice can be crucial. "This once again puts a premium on tax advisers giving appropriate advice to their clients," Brager said.