Can the IRS really revoke your passport because of your tax debt?
Alas, it is true. If you owe the IRS substantial back taxes, the government can keep you from travelling abroad, whether for business or pleasure, by denying you the privilege of a passport or revoking the one you already have. At the end of last year, with little fanfare, Congress enacted H.R.22 which added a new section to the tax code entitled: “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”
If you owe the IRS $50,000 or more and are worried and confused about your options, or if you have already received a Notice of Federal Tax Lien, you should consult an experienced and knowledgeable tax debt strategies attorney who will be able to provide you with options and put your mind at rest.
Reasons for the Law
Oddly, the law isn’t designed to deal with offshore accounts, criminal tax cases, or even situations in which the IRS fears you will flee your tax debt by leaving the country. The punishment was not crafted to fit the crime, but simply to make those with large debts to the IRS pay what they owe. The law seems to have been enacted more to solve a cash flow problem than to punish the guilty.
Originally proposed to Congress in 2012, the idea of passport revocation was not, at first, thought to be a good idea. When reconsidered in 2015, however, its possible efficacy somehow seemed more appealing. Congress decided that it was a realistic method of challenging those who had to travel for business, wanted to visit relatives abroad, or simply desired a vacation beyond U.S. borders to pay the price of being American citizens before departing.
Understanding the Law
It is interesting to note that there are two government agencies involved in this debt collection strategy: The State Department and the IRS. The law permits The State Department to revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt of more than $50,000. Theoretically, The State Department will act immediately upon being informed of the tax delinquency by the IRS, though of course in reality the government wheels turn slowly. Still, it is necessary to understand the law so that you will not be surprised to find yourself trapped in your own country because of a tax debt.
While many people feel that the IRS should not have the ability to involve itself in passports, others hold that the threshold of $50,000 ensures the federal government will only be restricting travel of those with substantial tax debt who can, more than likely, afford to pay up. The $50,000 amount, however, includes penalties and interest, both of which, as many of us are aware, can accrue rapidly.
Exceptions to the Law
If you are in the process of contesting a tax bill with the IRS or in the courts, the amount you are being billed is not yet considered a “tax debt.” Moreover, if you have begun the process of reimbursing the IRS with regular payments under an installment agreement, your passport will not be threatened. In addition, if you require your passport for “humanitarian reasons,” the state may grant you a passport in spite of your outstanding debt.