Revocation or Non-Renewal of Passports for Substantial Tax Debt
The IRS is allowed to deny your newly applied passports through the US State Department. In addition, passport renewal can be denied; or an already active passport revoked. The IRS is able to do this if it has confirmed that the taxpayers holding, renewing or applying for passports owe the government substantial back taxes.
How is this possible?
These measures can be undertaken due to a provision in the Fixing America’s Surface Transportation (FAST) Act of 2015 that gives the IRS leeway to make use of these consequences to ensure that individuals meet their US income tax obligations.
Who is affected?
US citizens working outside the country or who are just about to travel for work overseas may end up without valid passports. The passport is a vital document for living and working overseas, traveling abroad and- in many instances- the only means by which one can identify themselves and obtain residency abroad. Revocation, when individuals are already abroad, can therefore, be a huge inconvenience for them and their families.
What is the due process followed?
Certification of seriously delinquent debt is made by the IRS to the State Department. This constitutes money that has not been paid- and can be enforced by law (with the inclusion of interest and penalties)- by a person; and amounts to more than $52,000 (including penalties, interest and an annual adjustment for inflation). There needs to be a prior issued Levy and a filing of a federal tax lien notice; with all due process for collection under the law lapsed or exhausted.
What is Seriously Delinquent Tax Debt?
For unpaid taxes to be determined by the IRS as “seriously delinquent tax debt” to the State Department, normal investigation and processes of the collection must have been completed. Further, two notices require issuing before the rejection of passports or revocation may take effect. Individuals are required to make a call to the IRS within 1 month (3 months for those overseas) for the resolution of their account. Next, a contemporaneous notice to the individual to notify them of IRS certification must be sent to the State Department.
Adequate warnings are required to give a chance to affected individuals to sort out their back tax; which are sent by the regular mail using their last entered details. It is therefore important to regularly furnish the IRS with updated information.
What can I do as a taxpayer?
There are numerous choices at taxpayers’ disposal. First, individuals can choose to fully pay the taxes they owe. Second, one can pay the money by use of regular installments until the tax debt is fully cleared. Third, persons have an opportunity to reach a settlement with the Justice Department.
Fourth, people can negotiate and reach a consensus with the IRS where they can pay a reduced amount through an Offer in Compromise (OIC). This can be termed as the largest payable amount of money to the IRS in the least time possible. Finally, an individual can get into an IRS relief program. For instance some may decide to relinquish their US citizenship to be able to comply with their tax and filing obligations; thus getting relief for unremitted tax and their related penalties.
Is that all?
Some see this as a harsh measure to ensure the US tax obligations are met. Others are of the view that only imposing a limit on applications and renewals is not enforcement sufficient for effective collection of debt.