The IRS has many tools at its disposal to enforce the collection of unpaid tax debts, among them liens, levies, and even asset seizure. Beginning in late March, the IRS, in conjunction with the State Department, will have yet other weapon in its arsenal. Very shortly, the IRS will be forwarding the State Department information regarding individuals who have substantial tax deficiencies. Upon receipt of this information, the State Department can deny a taxpayer's passport application or renewal or place other restrictions on the taxpayer's passport.
What gives the IRS and State Department the right to restrict a person's passport?
In 2015 Congress passed the Fixing America's Surface Transportation Act, or the FAST Act. One provision in this bill requires that the IRS identify individuals with "seriously delinquent tax debt" and report this information to the State Department. By doing so, the federal government would have additional leverage against delinquent taxpayers.
What constitutes "seriously delinquent tax debt"?
The FAST Act defines "seriously delinquent tax debt" as unpaid taxes, penalties and interest of more than $50,000. In addition, the IRS will have issued a levy or filed a lien. Exceptions to this rule include:
- Taxpayers who are paying their delinquent tax debt via an installment plan
- Taxpayers who have settled debts through an offer in compromise
- Taxpayers appealing the issuance of a levy
- Taxpayers requesting innocent spouse relief
What is the process for informing taxpayers of their possible passport restriction?
The IRS will send a letter to the taxpayer informing him or her of the seriously delinquent tax debt, titled Notice of certification of your seriously delinquent federal tax debt to the State Department. The IRS will send the same letter to the State Department as well. At that time, the State Department will take action it deems appropriate.
For taxpayers who are travelling outside the United States, the State Department would allow them to return to the United States. For taxpayers applying for a passport, the State Department will give them 90 days to resolve the issue to the IRS' satisfaction. Current passport holders will not receive a similar grace period.
How do delinquent taxpayers get off the passport restriction list?
Taxpayers will be removed from the passport restriction list once they are in good standing with the IRS. Realistically speaking, this means establishing an installment arrangement or paying the debt in full. If the taxpayer contests some part of the debt, he or she could set up an installment agreement while later contesting the amount owed. It will not be sufficient for a taxpayer to pay just enough money to stay under the $50,000 threshold. Rather, taxpayers must reach some kind of permanent resolution to maintain the use of their passport.
A tax lawyer can provide the assistance you need
Any delinquent tax bill can trigger disruptive enforcement actions by the IRS. For individuals with delinquent taxes the time to act is now. Don't gamble with your ability to travel freely, the IRS can and will restrict your passport. The lawyers at Goldburd McCone LLP maintain a full-service tax practice to handle each and every issue for a delinquent taxpayer found above. If your passport is in jeopardy, don't wait a moment. Hire a skilled tax lawyer immediately.
Source: Ten things you need to know about passport restrictions on delinquent taxpayers, Tax Pro Today, by Jim Buttonow, January 31, 2017