TBJ January 2022

2021: The Year in Review

Tax Law

Written by Renesha N. Fountain

During the COVID-19 pandemic, taxpayers have faced financial challenges, while the IRS and the courts have experienced delays in processing mail. Practitioners are taking advantage of tax relief options, addressing problems related to backlogs, and advising clients on potential issues as some travel bans are lifted.

Taxpayer Relief Initiative To assist struggling taxpayers, in November 2020, the IRS announced the Taxpayer Relief Initiative.1 Eligible taxpayers who had short-term payment plans were granted more time to pay. The IRS is more open to working with taxpayers who are temporarily unable to satisfy the payment terms of an accepted offer in compromise (“offer”). The IRS will automatically include additional tax balances in existing installment agreements for individuals and businesses that are no longer operating.

The IRS will grant certain individual taxpayers (with liabilities under $250,000) an installment agreement without submitting a financial statement if their proposed monthly payment is adequate. Notably, there is no requirement to file a notice of federal tax lien if taxpayers owe less than $250,000 for the 2019 tax year only. Also, eligible taxpayers can modify an installment agreement online. The IRS is also encouraging taxpayers to request currently not collectible status or seek penalty abatement if circumstances warrant these actions.

U.S. Tax Court Filings In 2021, petitioners filed substantially more petitions in the U.S. Tax Court (“tax court”) than in prior years.2 Due to delays in processing petitions and serving the IRS, some petitioners received tax assessments for years in which they had timely filed a petition.3 The tax court started notifying the IRS of filed petitions before actual service was made in an effort to reduce the chances of a premature assessment or collection action against petitioners.4 Petitioners can contact the IRS via email at taxcourt.petitioner.premature.assessment@irs.gov about these issues.5

Revocation or Denial of Passports Under Internal Revenue Code Section 7345, an individual with a “seriously delinquent tax debt” may have his or her passport denied or revoked. A seriously delinquent tax debt is “an unpaid legally enforceable [f]ederal tax liability of an individual” that: (i) has been assessed; (ii) is greater than $50,000* (*indexed for inflation—$54,000 for 2021) (I.R.C. § 7345(b)(1)); and (iii) for which the IRS has filed a notice of federal tax lien or issued a levy.6

Seriously delinquent tax debts do not include debts that the taxpayer is timely paying under an installment agreement or offer or debts in which the collection action is suspended due to a requested or pending CDP request or innocent spouse request.7

If the IRS certifies that an individual has a seriously delinquent tax debt, the secretary of the treasury is required to notify the secretary of state “for action with respect to denial, revocation, or limitation of a passport.”8 A taxpayer may dispute this certification by filing a petition in the tax court or filing suit in a U.S. district court.9 In Rowen v. Commissioner, 156 T.C. No. 8 (Mar. 30, 2021), the tax court held that Section 7345 does not prohibit international travel and thus does not violate the due process clause of the Fifth Amendment or the Universal Declaration of Human Rights. The tax court noted that Section 7345 simply provides a mechanism by which the commissioner may certify a debt to the secretary of the treasury who then submits the certification to the secretary of state.10 Importantly, all passport-related decisions remain with the secretary of state to take action.11

1. IR-2020-248.
2. Tax Court Press Releases dated Jul. 23, 2021, and Aug. 16, 2021.
3. Id.
4. Id.
5. Id.
6. I.R.C. § 7345(b).
7. I.R.C. § 7345(b)(2)(A) & (B).
8. I.R.C. § 7345(a).
9. I.R.C. § 7345(e)(1).
10. Id.
11. Id.; see also Maehr v. U.S., 5 F.4th 1100 (10th Cir. 2021) (court found that international travel is not a fundamental right and upheld the constitutionality of Section 7345); Garcia v. Commissioner, 157 T.C. No. 1 (Jul. 19, 2021) (Tax court held that married taxpayers can file a joint petition seeking review of the certification).

RENESHA N. FOUNTAIN serves as senior counsel in the Houston office of Chamberlain, Hrdlicka, White, Williams & Aughtry. She has extensive experience representing individuals and businesses in federal tax disputes before the Internal Revenue Service and in the U.S. Tax Court. Fountain is also the treasurer of the State Bar of Texas Tax Section.

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