The Internal Revenue Service recently announced that Americans with seriously delinquent tax bills will be denied passports or have their passports revoked if they do not pay their tax bill.
A seriously delinquent tax debt is defined as an outstanding IRS tax liability in which the taxpayer owes the government more than $51,000 in back taxes, penalties, interest and has previously filed a Notice of Federal Tax Lien and the period to dispute the lien has expired.
The IRS has the power to bar passports, codified in section 7345 of the internal revenue code in 2015. Thanks in part to FATCA (Foreign Account Tax Compliance Act), the IRS has been sending tens of thousands of violators’ names to the State Department.
Once the State Department receives certification of a tax debt from the IRS, the State department is called to discontinue issuing or renewing the taxpayers’ U.S. passport. The State Department may also revoke the passport. The State Department has issued a warning to violators who do not resolve their tax issues before applying for a passport will have their application delayed or denied.
Taxpayers with passports, or who are planning international travel in the future, should act now to avoid the IRS from tipping them off to the State Department. The taxpayer should consider:
- Paying the debt, negotiating an installment agreement or applying for an offer in compromise.
- IRS streamlined procedures, and for a short time, the IRS’s Offshore Voluntary Disclosure Program. These programs allow the taxpayer to come into compliance without risking a referral to Criminal Investigation, and offers the taxpayer an opportunity to minimize their exposure to significant IRS penalties.
Taxpayers who are in bankruptcy, victims of identification fraud, or those taxpayers living in a federally declared disaster area, are not at risk for having their passports revoked.
Passport revocation does not appear to be going away. A recent report issued by the Taxpayer Assistance Service indicates that the IRS plans on stepping up its certification to a staggering rate of five to ten percent each week until all seriously delinquent accounts have been certificated to the State Department.