December 10, 2015

Fixing America's Surface Transportation (FAST) Act

Fixing America's Surface Transportation (FAST) Act Tax & Business

Congress has recently passed and the President has signed the Fixing America’s Surface Transportation (FAST) Act.

The new law:

  • Provides for the possible revocation or denial of a passport for individuals who have a “seriously delinquent tax debt.”
  • Requires IRS to enter into tax collection contracts for inactive tax receivables.
  • Repeals the 3.5-month automatic extension for filing Form 5500 (recently enacted) and restores the old 2.5-month period.

Loss or Denial of Passports.
Those with a “seriously delinquent tax debt” exceeding $50,000 can be subject to a denial, revocation or limitation of his or her passport. This is essentially a new collection technique, effective January 1, 2016.

The IRS is authorized to certify to the State Department that a “seriously delinquent tax debt” is in excess of $50,000. This is a debt for which:

  1. A notice of lien or levy has been filed (under IRC sections 6323 or 6331).
  2. Collection is not suspended due to a collection due process hearing or due to innocent spouse relief requested or pending.
  3. The tax has been assessed.
  4. Payment is not being timely made under an installment agreement or offer in compromise.

Taxpayers will be provided with a right to challenge the IRS certification, including adjudication through court action (US District Court or US Tax Court).

IRS Use of Private Collection Agencies.
IRS was previously authorized to utilize private collection agencies, but indicated that it would not renew its contracts since it believed that IRS employees did a better collection job. This was, in part, due to the increased flexibility that IRS personnel had in settling cases. Under the FAST Act, the IRS is mandated to enter into contracts with private collection agencies for the collection of certain “inactive tax receivables.” These are amounts which have been removed from IRS’ active inventory of receivables due to a lack of resources or the inability to locate the taxpayer. In addition, more than half of the statute of limitations for collection must have passed. Where the collection matter has been assigned to an IRS employee, more than 365 days must have passed without interaction between IRS and the taxpayer or the taxpayer’s representative.

Some debts are excluded from receivables which can be transferred:

  • Debt subject to an offer-in-compromise.
  • Debt classified as an innocent spouse debt.
  • Debt of a person who is: a) under age 18; b) deceased; c) in a designated combat zone; or d) the victim of tax-related identity theft.
  • Debt which is currently the subject of examination, litigation, criminal investigation or levy.
  • Debt subject to an appeals procedure.

This provision of the law mandates IRS begin such contracting by March 4, 2016.

Form 5500 Automatic Extensions.
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, passed earlier this year, provided for an automatic extension of 3.5-months for the filing of Form 5500 for employers who sponsor certain pension and employee benefit plans. The FAST Act reduces the extension period to 2.5-months (the original automatic extension period).

If you have any questions, please contact your Marcum tax professional.

A special thanks to article contributor Michael D’Addio, Principal, Tax & Business Services.

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