Before getting on a plane, taxpayers with large outstanding tax debts should check their mail for an Internal Revenue Service (IRS) Notice CP508C.

This notice is qualitatively different from other IRS notices that the taxpayer may receive, and it's essential to understand the notice's significance. Having a Notice CP508C can mean that you might not be able to leave the U.S. or come home as easily as you had planned.

CONTENTS OF THE CP508C NOTICE

A CP508C Notice is a letter from the IRS to notify a taxpayer that the agency is notifying the State Department that the taxpayer is “seriously delinquent” in paying outstanding federal taxes.

A taxpayer is “seriously delinquent” when they owe more than $52,000 (adjusted annually for inflation) in tax debt, penalties, and interest, and the IRS has already issued a levy to seize assets relating to this debt.

The notice states an amount that the taxpayer owes from different tax years, as well as the additional penalties and interest. The notice explains how the penalties and interest are assessed and reasons how a penalty might be challenged. However, the CP508C only includes the amount that is reported to the State Department. The total balance due may be higher than the amount in the notice.

WHY THE CP508C MATTERS

Under a 2015 law, when the IRS notifies the State Department of a taxpayer's seriously delinquent status, then the State Department is, generally speaking, prohibited from issuing or renewing the taxpayer's passport.

If a taxpayer is out of the country when the notice is issued, the State can issue a temporary passport that's only good until the taxpayer returns to the United States.

Beyond the literal significance of the notice, practically speaking, the notice also serves that the IRS is taking action against the taxpayer. There's no more use in delaying or ignoring the IRS' collection efforts.

WHAT YOU NEED TO DO NOW

If you have received a CP508C Notice, you can also fight the IRS's certification in court if it was done in error.

Alternatively, if you do not dispute the amount owed, you can pay the debt. Once you have, the IRS will send a new notification to the State Department, releasing the hold from your passport.

If you agree with the debt but can't pay it, you may be able to work out a payment plan or negotiate a settlement with the IRS. If so, the State Department can release your passport, and the IRS will stop seizing your assets.

HOW AN EXPERIENCED TAX ATTORNEY CAN HELP 

If a taxpayer has received a CP508C Notice, the IRS is already taking active steps to collect the debt. An attorney can help you contest the debt. They can help challenge the assessment of penalties and petition the IRS to remove the State Department certification as they negotiate a settlement on your behalf.

An attorney can often get the debt reduced to pennies on the dollar. An attorney may even get that tax debt reduced to zero, as Gabaie & Associates were recently able to do for one of the firm's clients.

Maryland tax attorney Gabaie & Associates has offices in Baltimore, Annapolis, Rockville, and Columbia, and Juda Gabaie specializes in helping business owners with taxes. We can review your current tax liability, help you work with the IRS to resolve the outstanding debt, and then come up with a plan to avoid future concerns.  

Contact Gabaie & Associates, LLC today by calling us at (410) 358-1500 or by emailing us to schedule a free consultation.