Protect your Passport if You Owe the IRS
Protect your passport against seizure by the State Department. The IRS is now implementing new procedures to collect tax debts which limit travel for individuals with “seriously delinquent tax debts.” Travel can be limited, restricted or totally prohibited, both internationally and domestically under this law.
Protect your passport from revocation or denial.
These new laws are buried in the December 2015 Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015, with funding through 2020:
H.R. 22, Fixing America’s Surface Transportation Act (FAST Act) authorizes federal surface
transportation programs through fiscal year 2020. The FAST Act improves our Nation’s
infrastructure, reforms federal surface transportation programs, refocuses those programs on
addressing national priorities, and encourages innovation to make the surface transportation
system safer and more efficient.
Using your need or desire to travel, and limiting your ability to do so, as a means to enforce and collect tax debts is not new. In 2011, the GAO reported that 224,000 people, collectively owing almost $6 billion in unpaid federal taxes, received passports in 2008. Using passports as a tool to collect taxes was first proposed in 2012, but was considered a bad idea.The IRS gained power over passports when Congress added Section 7345 “Revocation or Denial of Passport in Case of Certain Tax Delinquencies” to H. R. 22.
“(a) In General.–If the Secretary receives certification by the Commissioner of Internal Revenue
that an individual has a seriously delinquent tax debt, the Secretary shall transmit such certification
to the Secretary of State for action with respect to denial, revocation, or limitation of a passport
pursuant to section 32101 of the FAST Act.”
The little-known Section 7345 to the “infrastructure-friendly” FAST Act requires the IRS to certify and notify the State Department of taxpayers owing a seriously delinquent tax debt. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.
In mid-2016 the details were unclear. They still are. In fact, the Treasury regulations explaining how the program will be administered haven’t been published yet, and the IRS manual and the State Department haven’t provided any specific rules. It could be several months before these are ready.
Who is at risk?
Seriously delinquent generally refers to an individual’s unpaid, legally enforceable federal tax debt totaling more than $50,000, including interest and penalties, adjusted for inflation annually. This law provides the first and only tax-related grounds for revocation or denial of a U.S. passport!
If you are at risk, how can you protect your passport?
The first thing you should do if you even suspect you could be at risk is to make an appointment with me immediately. Once your tax debt is labeled seriously delinquent, even paying it down doesn’t help. The IRS will not reverse a certification because the taxpayer pays the debt below $50,000. Remedies to stop the IRS from notifying the State Department can include:
- Paying the tax debt in full
- Paying the tax debt timely under an approved installment agreement,
- Paying the tax debt timely under an accepted offer in compromise (in 2015, of 67,00 submitted, the IRS approved only 27,417)
- Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
- Having requested or have a pending collection due process appeal with a levy,
- Seeking an offer in compromise to have the IRS look at the taxpayers income and assets to determine ability to pay, or
- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department, and the individual’s passport is not subject to denial during this time. The IRS also states that a passport won’t be at risk for any taxpayer:
- Who is in bankruptcy.
- Who is identified by the IRS as a victim of tax-related identity theft.
- Whose account the IRS has determined is currently not collectible due to hardship.
- Who is located within a federally declared disaster area.
- Who has a request pending with the IRS for an installment agreement.
- Who has a pending offer in compromise with the IRS.
- Who has an IRS accepted adjustment that will satisfy the debt in full.
Other issues should encourage you to protect your passport.
- U.S. Expatriates who have not notified the IRS or fail to file taxes, may find their small tax debt meeting the threshold when the IRS uses their authority under IRC Section 7345.
- Taxpayers not yet in compliance of the REAL ID Act, which generally allows the use of a passport in place of compliant REAL ID, could be prohibited from domestic travel if their passport has been revoked.
- Currently, there are no provisions to expedite the removal of passport restrictions after a taxpayer gets in good standing with the IRS. Remember, the IRS is right until you prove them wrong, and in order to protect your passport, you don’t want to get into that long, slow line waiting for the IRS and State Department to remove your passport restrictions or accept your application.
- A business owner could find themselves “seriously delinquent” if certain business and individual taxes exceed the threshold. There is no regulation stating that a business partner’s personal tax debts, combined with an existing business tax debt, wouldn’t put other partners at risk.
The bottom line
If you’re not totally confident that you are exempt from any implications of this now-enforced law, and you want to protect your passport, we need to talk.
We establish and maintain a business and personal relationship with our clients. We know that Your BUSINESS is Your Life, and Your LIFE is Your Business and we take both seriously.
Call us at 479.478.6831. Use my Calendy Page (it’s easy) to set an appointment, or contact me by email melanie@radcliffcpa.com
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