It is no surprise that the Internal Revenue Service (IRS) will impose penalties if you do not pay your tax bill. The agency is clear about its ability to fine taxpayers' various penalties and fees and, in some cases, potential for imprisonment for failure to meet our tax obligations.
But taxpayers are wise to take note: these are not the only penalties the IRS can apply. Another penalty you may not be aware of is the agency's ability to take away your passport.
Is it legal for the IRS to take away a passport? Yes, the IRS has the legal power to revoke a passport as a tax penalty. The agency uses this power in cases where a taxpayer has a large tax bill.
Whether or not the process the IRS uses to apply this power is fair is another discussion. Members within the IRS have voiced concern about this process. More specifically, the National Taxpayer Advocate has stated the agency fails to notify a taxpayer's representative when their bill is certified as "seriously delinquent." This organization operates with the IRS and aims to help taxpayers navigate the system. The group points out advanced notice would likely result in taxpayers resolving their debts.
When does the IRS certify a taxpayer as having a "seriously delinquent" tax debt? The Tax Cuts and Jobs Act (TCJA) defines "seriously delinquent" as an unpaid tax liability over $50,000.
What if I have a tax debt of $50,000 or more? Taxpayers with this type of tax debt have options. Examples can include installment agreements or offers in compromise. Discuss these and other viable alternatives with the attorneys at Goldburd McCone.