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What Can You Do If The IRS Has Revoked Your Passport Because Of A Tax Debt?

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As a taxpayer, it is essential to remain compliant with the Internal Revenue Service (IRS) to avoid potential penalties or legal consequences. While many individuals might be aware of some tax-related consequences, not everyone knows that a significant tax debt or issue can lead to the revocation of their passport. This article will delve into the circumstances under which the IRS can revoke a passport and offer guidance for resolving tax issues.

The IRS and Passport Revocation

The IRS has the authority to revoke a passport under a provision of the Fixing America’s Surface Transportation (FAST) Act, which was enacted in December 2015. This law mandates the IRS to work in coordination with the State Department to deny, revoke, or limit the passport of any individual with a ‘seriously delinquent tax debt.’

What Constitutes a Seriously Delinquent Tax Debt?

A seriously delinquent tax debt is an individual’s unpaid, legally enforceable federal tax debt, including penalties and interest, totaling more than $59,000 (as of 2023, adjusted for inflation). The following conditions must also apply:

  1. A notice of federal tax lien has been filed, and all administrative remedies have been exhausted or lapsed.
  2. A levy has been issued by the IRS.

Exceptions and Exclusions

There are specific situations in which a taxpayer with a seriously delinquent tax debt might not face passport revocation:

  1. The taxpayer is in the process of disputing the tax liability in question through an IRS administrative appeal or in court.
  2. The taxpayer has requested innocent spouse relief under the IRS provisions.
  3. The tax debt is under consideration for an installment agreement, offer in compromise, or suspension of collection due to a collection due process hearing.

Moreover, passport revocation may not apply to taxpayers in a federally declared disaster area, victims of tax-related identity theft, those currently in bankruptcy, or those living in a combat zone.

How Does the Process Work?

If an individual meets the criteria for passport revocation, the IRS will send a certification of the seriously delinquent tax debt to the State Department. Before the certification, the IRS will mail a Notice CP508C to the taxpayer’s last known address, informing them of their tax debt and the possible passport consequences. The State Department may then revoke the passport or limit it to return travel to the United States.

Reversing the Revocation

To reverse the passport revocation, the taxpayer must resolve their tax debt through one of the following methods:

  1. Pay the tax debt in full.
  2. Enter into an installment agreement with the IRS.
  3. Settle the tax debt through an offer in compromise or another IRS-approved method.
  4. Request innocent spouse relief.
  5. Have the tax debt suspended due to a collection due process hearing or another valid reason.

Once the tax debt is resolved, the IRS will send a reversal certification to the State Department, typically within 30 days. The State Department will then reinstate the individual’s passport privileges.

Preventive Measures

To avoid the risk of passport revocation, it is crucial to stay proactive with your tax obligations. Here are some tips to help you stay compliant:

  1. File your taxes on time and accurately to avoid penalties and interest.
  2. If you cannot pay your tax debt in full, consider setting up an installment agreement or apply for an offer in compromise.
  3. Consult a tax professional or tax attorney if you have any concerns or require assistance in resolving tax issues.

Our Raleigh Tax Controversy Attorneys Can Help

While the IRS can revoke a passport due to a seriously delinquent tax debt, there are steps that taxpayers can take to prevent this from happening or to resolve their tax issues. By staying proactive and addressing any tax concerns with the assistance of a knowledgeable tax attorney, taxpayers can minimize the risk of passport revocation and navigate the complexities of tax compliance. 

In cases where the revocation has already occurred, it is essential to act quickly and work closely with the IRS to settle the tax debt and reinstate passport privileges. By staying informed and taking appropriate measures, taxpayers can avoid the serious consequences of passport revocation and maintain their ability to travel internationally without restrictions.

Don’t let tax issues jeopardize your freedom to travel; contact the experienced tax attorneys at Wilson Ratledge today for expert guidance and personalized solutions to resolve your tax concerns. Let us help you protect your passport and your financial future.

What’s New for Extended Compensation

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Less than two weeks after the North Carolina Court of Appeals made a decision in Sturdivant v. N.C. Dept. of Public Safety, which would have ultimately determined how claims for extended compensation were handled, the court’s opinion was withdrawn, without explanation.

However, on April 18, 2023, the North Carolina Court of Appeals filed a new decision in the case of first impression on extended compensation in North Carolina.  Unfortunately, the Court of Appeals maintained that the term “total loss of wage-earning capacity” in the extended compensation (post-500 weeks) section of the statute is no different that the term “total disability” in the temporary total disability section of the statute.  In doing so, the Court of Appeals added to its decision that the 2011 amendment to the Workers’ Compensation Act did not create a higher burden of proof in order for an employee to qualify for extended compensation.  Instead, the Court of Appeals wrote, the standard of proof for an award of extended compensation is the very same standard of proof for an award of TTD benefits during the initial 500 week period.  We believe (as did the Industrial Commission) that the Legislature intended the burden of proving extended disability to be significantly higher than the burden for ordinary TTD, and anticipate that the parties will seek review by the Supreme Court. 

Our workers’ compensation defense attorneys will monitor Sturdivant for an appeal to the North Carolina Supreme Court, and a decision in the companion case, Betts v. N.C. Dep’t of Health & Hum. Ser., for any changes to the interpretation of “total loss of wage-earning capacity” in extended compensation cases. 

We welcome any inquiries you may have about the Sturdivant decision or extended compensation in North Carolina.

Preparing for Your Pet’s Future With a North Carolina Pet Trust

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North Carolina Law Has Provisions For You To Arrange Care For Your Pets As Part Of Your Estate Planning

People love their pets. To outsiders – particularly those who do not own pets – love may sometimes seem excessive. The fact remains, though, that there is a bond between pets and their owners. One of the essential parts of that bond is the obligation of the owner to provide care for the pets, which can’t provide for themselves. The owner provides love, food, and shelter in exchange for loyalty and companionship from the pets. So what happens to your pets when you die? 

Fortunately, North Carolina law has provisions that make it easy to ensure that you can continue to provide proper care for your pets even after you are gone without relying upon someone’s promise that they will take care of things. Our estate planning attorneys at Wilson Ratledge explain more below.

North Carolina Lets You Take Legal Action In Your Will To Care For Your Pets When You No Longer Are There To Do So

In 1995, the North Carolina legislature passed a statute enabling pet owners to establish a testamentary trust to care for their pets after the owner has passed away. A testamentary trust is one established in your will that provides a governing structure intended for a particular purpose and funds it with a part of your estate to pay for whatever purpose the trust is designed to serve, which in this case would be the care of your pets. Under the statute, the trust is to benefit those pets of yours that are alive at the time of the establishment of the trust. However, you can work with your estate planner to update the trust to include any pets you obtained after the initial creation of the trust. The trust terminates once the last surviving animal covered under the trust passes away.

A trust for your pet is every bit as legally enforceable as any other trust, meaning the trustee you designate has a fiduciary obligation to adequately provide for the care of the pets identified in the trust. The trustee uses the money placed into the trust to pay for that care. That care can be as described explicitly in the trust as you like. You can identify particular veterinarians to provide medical care for the pets, how often the pets should be taken to the vet, a specific brand of pet food, or even the frequency of visits to the dog park. Your pet, your trust.

You can identify someone to serve as a trustee who is required to either provide care for the pets identified in the trust or arrange for that care. In either case, the trust pays for the maintenance of the covered pets for as long as they live, after which any funds remaining in the trust are distributed as directed in the trust document. During the course of the trust, no principal placed in the trust, nor investment income earned by the trust, can be used by the trustee or for any other purpose other than the care of the designated pets that are the beneficiaries of the trust.

If you don’t designate a person to manage the trust, the clerk of the superior court with jurisdiction over the trust can do so upon the application of “a person.” Given that vagary, it is probably best to designate someone you know who will properly care for your pets. You need to ensure that the person you designate is willing to serve and will be able to do so when the time comes, or else the clerk of the superior court will appoint a different trustee.

Work Closely With Your Estate Planner On Your Pet Trust

Your pet trust can include as much specificity as you like. You need to make clear to your estate planner exactly what you want to accomplish with the trust. If you wish for a particular pet food to be given to your pets, or daily dog park visits, you better tell your estate planner. Telling the person you designate as trustee is not legally enforceable. On the other hand, it might not be wise to make serving as a trustee too burdensome. You need to talk to the person you plan to designate as a trustee to ensure that person is willing to do what the trust requires. 

You also need to communicate clearly to your estate planner what pets are to be covered by the trust. In case you might outlive the pets originally covered by the trust and get more pets, be sure to have your estate planner draft the trust to include any pets you acquire later. Otherwise, those pets will not be covered.

If You Want To Establish A Pet Care Trust, Talk To The Estate Planning Attorneys of Wilson Ratledge

While many people might think it a little silly to provide for the care of your pets via a trust in your will, in reality, it is both quite responsible and can be a source of peace of mind knowing that your pets will be cared for according to your wishes when you pass away. The estate planning attorneys of Wilson Ratledge can help you with that endeavor and any other estate-planning matters. Contact us today. Our knowledge and experience regarding estate planning will help you easily navigate the process.

NC Court of Appeals Decides First Extended Benefits Case Under N.C. Gen. Stat. §97-29(c)

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Both sides of the bar have been anxiously awaiting decisions from the North Carolina Court of Appeals that will determine how claims for extended compensation pursuant to N.C. Gen. Stat. § 97-29(c) are handled.  The first decision in this line of cases has now arrived. 

In Sturdivant v. N.C. Dept. of Public Safety, the plaintiff sought benefits beyond the 500 weeks for his back injury.  On appeal, plaintiff argued that he had “total loss of wage-earning capacity,” and that the Industrial Commission erred in concluding that his burden of proof was higher than the standard for proving “total disability.”  The defense bar disagrees with this definition, and in their Amicus Brief (co-authored by Wilson Ratledge attorneys Frances M. Clement and Kristine L. Prati), the North Carolina Association of Defense Attorneys (NCADA) argued that in 2011, the Legislature created a separate section for extended compensation and specifically used the term “total loss of wage-earning capacity” instead of the term “disability,” therefore indicating that a different standard applies for an award of extended compensation.   

The Court of Appeals unfortunately agreed with plaintiff’s argument that “total loss of wage-earning capacity” is synonymous with “total disability.”  However, the Court of Appeals agreed with defendants’ argument that the burden of proof rests with plaintiff, and ultimately upheld the Industrial Commission’s denial for an extension of benefits, as the evidence showed that there were jobs available for plaintiff, and that plaintiff was capable of performing those jobs given his physical restrictions, education, and work history. 

We will be monitoring this case for any appeal to the N.C. Supreme Court, as well as a decision in two other extended compensation cases pending at the Court of Appeals.

Read the full decision here

If you have any questions about this case or extended compensation, please contact one of the workers’ compensation attorneys!

Gun Trusts in North Carolina: What are They and How Can You Set One Up?

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Want to protect your firearms and pass them down to future generations? A gun trust in North Carolina may be the solution. In our latest article, the North Carolina estate planning attorneys at Wilson Ratledge will explain what a gun trust is and how to set one up.

What is a Gun Trust?

A gun trust, also known as a firearms trust, is a legal entity that you create to hold and manage firearms. The trust is controlled by a trustee, who is responsible for managing the firearms and ensuring that they are used in compliance with state and federal laws. Beneficiaries of the trust, known as trust beneficiaries, are individuals who are allowed to access and use the firearms.

Benefits of a Gun Trust in North Carolina

There are several benefits to creating a gun trust in North Carolina. Some of the most notable include:

Allowing Multiple Individuals To Access and Use the Firearms

A gun trust allows multiple individuals, known as trust beneficiaries, to access and use the firearms. This can be especially useful for families who want to ensure that multiple members can use their guns for hunting or self-defense.

Protection from Creditors 

Assets held in a trust are generally protected from creditors. This means that if the trustee or one of the trust beneficiaries were to become the subject of a lawsuit, the firearms held in the trust would not be at risk of being seized.

Streamlining the Process for Obtaining Certain Types of Firearms

In North Carolina, certain types of firearms, such as those subject to the National Firearms Act (NFA), require a special process for acquisition and ownership. A gun trust can streamline this process and make obtaining these types of firearms easier.

Avoiding Probate

When a person passes away, their assets go through probate. Probate can be a lengthy and expensive process, and it can also make the assets public record. A gun trust can help to avoid probate and keep the assets private.

Avoiding the Need for a Will

A North Carolina gun trust can be used to transfer firearms to beneficiaries upon the death of the trustee, avoiding the need for a will.

How to Set Up a Gun Trust in North Carolina

Setting up a gun trust in North Carolina is a relatively simple process. It involves the following steps:

Choose a Trustee 

The trustee is the individual who will be responsible for managing the firearms and ensuring that they are used in compliance with state and federal laws. It is essential to choose a trustee that you trust and who has a good understanding of firearms and the laws surrounding them.

Choose Trust Beneficiaries 

Trust beneficiaries are the individuals who will be allowed to access and use the firearms. It is crucial to consider the age and experience level of the beneficiaries to avoid any potential legal issues that may arise from firearm misuse.

Have an Attorney Draft the Trust Agreement

The trust agreement is the document that sets out the terms and conditions of the trust. It should include information such as the trustee’s responsibilities, the trust beneficiaries, and the firearms to be held in the trust. The trust agreement should also include instructions for what should happen to the firearms in the event of the trustee’s death or incapacity.

Fund the Trust 

The trust must be funded with the firearms that will be held in the trust. This can be done by transferring ownership of the firearms to the trust or by purchasing firearms using trust funds.

Register the Trust 

In North Carolina, a gun trust must be registered with the state before acquiring any firearms subject to the National Firearms Act (NFA). The registration process will include submitting a copy of the trust agreement and a list of the firearms to be held in the trust.

Review and Update 

It is important to review and update the trust agreement regularly to ensure that it continues to meet the needs of the trustee and beneficiaries and complies with any changes in the law.

Contact Our Law Firm for Assistance

Gun trusts can be useful for managing firearms in North Carolina, but they are subject to an extremely intricate and complex web of state and federal laws. If you’re interested in setting up a gun trust, it’s important to work with one of our North Carolina trust attorneys at Wilson Ratledge. Our attorneys specialize in North Carolina firearms law, and we can help you set one up that meets your needs. 

Tax Hardship: What To Do if You’re Offered an IRS Offer in Compromise

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Owing The Government Large Sums Of Money For Taxes Can Be Daunting, But It Happens

It could happen any number of ways – whether through under-withholding, untaxed income, or estimating quarterly tax payments required – but every year, thousands of people find themselves owing the Internal Revenue Service more than they can repay, at least at that moment. The IRS is not famous for being in the habit of waiting for payment. The IRS has an impressive array of collection options – it can seize and sell your property to pay your tax debt, garnish your wages, and place liens on your home and bank account. 

Owing the IRS money is not a small matter. A payment plan is an option for many people, but if you owe a lot, IRS payment plans are time-limited, and you might be unable to afford the payments to pay off the entire debt during the time period of the payment plan. Fortunately for people in this situation, the IRS provides another option for repayment, known as an offer in compromise.

An Offer Of Compromise Provides An Avenue Out From Under Debts Owed To The IRS

An offer of compromise is a process whereby you can make an offer to the IRS to pay an amount that is less than you owe in satisfaction for the total debt. Basically, you file copious amounts of paperwork, including IRS forms that include detailed information about your financial situation, including assets, debts, and the like, and you offer an amount you consider yourself willing to pay instead of the full amount owed. While the acceptance rate for such offers used to be less than 25 percent, in recent years, that amount has increased to about 45 percent. If your offer is accepted, you are deemed to have satisfied your entire tax debt.

The process is complicated, but the IRS provides a Taxpayer Advocate Service that can give you some assistance regarding an offer of compromise. They provide assistance and information, not advice – you’ll have to go elsewhere for that.

What Is Required To File An Offer Of Compromise?

The first requirement is that you be eligible to file an offer of compromise. To pass that first hurdle, you must show that:

  • You are not currently in a bankruptcy proceeding.
  • You have filed all previously required tax returns and have made all estimated or actual payments for taxes due on those returns.
  • If you are applying for an offer in compromise for the current year, provided you are applying for an offer of compromise for the current year.
  • If you are an employer, you have made required quarterly tax payments for the current quarter and for the two-quarters previous to your applying for an offer of compromise

If you meet those requirements, you can move on to filing an offer of compromise. That, in itself, can be a daunting process. You will be required to complete several IRS forms and provide significant amounts of information regarding your monthly income, cash on hand, debt, and assets. You also will be required to detail monthly expenses, including rent or mortgage, grocery costs, utilities, and any other recurring monthly expenses. You also will have to pay the application fee, which is refundable if your offer of compromise is rejected, and payment toward what you propose as the balance due on your taxes. Obviously, the proposed balance due will be less than the amount the IRS says you owe. If you opt for a payment plan, you will include the first payment amount. You also could include payment for the entire amount owed that you propose. Even if your offer is rejected, however, the IRS will keep your payment and apply it to the amount of taxes the IRS says are owed.

There are a number of reasons the IRS might reject your offer. Among them are failing to meet any of the requirements for eligibility, you failing to include the application fee, or the IRS has referred your case to the Department of Justice for prosecution. Reasons for accepting your offer come down to whether the IRS believes it can collect the entire amount due or whether the IRS believes it can collect that amount but that it would be unfair, inequitable, or cause economic hardship.

If You Owe Significant Amounts To The IRS, Contact The Tax Attorneys of Wilson Ratledge

The IRS is a formidable opponent with an unmatched ability to disrupt your life financially and even seize your assets. If you owe money to the IRS that you can’t repay, you should consider an offer of compromise. You should contact the North Carolina tax attorneys of Wilson Ratledge. We have the knowledge and experience to help you through the process.