Owe Back Taxes to the IRS? The Government Could Take Away Your Passport

Owe Back Taxes to the IRS? The Government Could Take Away Your Passport

Are you planning on taking a trip overseas to escape the harsh winter weather?  Are you already a citizen abroad?  If you answered yes to either of those questions, now is the time to get caught up if you owe back taxes to the IRS.  Legislation passed by Congress in December, called the Fixing America’s Surface Transportation Act, or the FAST Act, gives the Department of State power to deny or revoke passports for Americans at home and abroad who owe the IRS more than $50,000 in back US taxes.  

FAST Act Grants State Dept. Power to Revoke, Deny Passports if Tax Debt Exceeds $50,000

The idea of revoking or denying passports as a penalty for failure to pay taxes first began circulating in 2011, when the Government Accountability Office (GAO) released a federal tax collection report containing the following recommendation:

“If Congress is interested in pursuing a policy of linking federal tax debt collection to passport issuance, it may consider taking steps to enable State to screen and prevent individuals who owe federal taxes from receiving passports.  This could include asking State and IRS to jointly study policy and practical issues and develop options with appropriate criteria and privacy safeguards.”

The proposal sparked controversy then, just as it does now – only this time, the idea managed to find its way into law.  In 2015, the House voted 359 to 65 in favor of the FAST Act, while 60 votes were achieved in the Senate.  The bill was signed into law by President Barack Obama in December.

us taxes for expats

The passport provision is easy to miss in the sprawling text of the FAST Act, formally H.R. 22.  Yet its terms are plain enough, if you know where to look for them.  Tucked inconspicuously beneath Title XXXII, Subtitle A (Tax Provisions), you’ll find that Section 32101, which governs “revocation or denial of passport in case of certain unpaid taxes,” has been amended by the addition of Section 7345, which is even more specific: “revocation or denial of passport in case of certain tax delinquencies.”  Section 7345 provides the following:

“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.”

In other words, the IRS is working with the Department of State to determine whose passport applications should be denied, or whose existing passports should be taken away.  You could belong in that category if you owe more than $50,000 in unpaid back taxes, including penalties and interest, if a notice of levy or lien has already been filed.  (Of course, the $50,000 figure will be adjusted each year to account for inflation.)

Does H.R. 22 Make Any Exceptions for IRS Travel Restrictions?

If you’re already in the process of paying off your tax debts, you should be in the clear, as the bill makes an exception for “a debt that is being paid in a timely manneritalics our emphasis.  The bill also makes exceptions for debts which are in the process of being contested (“a debt with respect to which collection is suspended… because a due process hearing… is requested or pending”).  A little further along, the bill makes additional exceptions for “emergency and humanitarian situations,” in which case the Secretary of State is authorized to issue passports on an individual basis.

us taxes

While the Joint Committee on Taxation projects that the passport provision of H.R. 22 will pump nearly $400 million into the US economy over the next decade, it certainly isn’t without its drawbacks.  Perhaps needless to say, this provision could have intensely negative repercussions for taxpayers – particularly those located abroad, about 855,000 of whom receives notices from the IRS in 2014.  While an American at home might face ruined travel plans – not to mention some consternation over the Constitutionality of restricting free travel – US citizens abroad frequently rely on their passports for basic daily tasks, such as banking.  However, the bill does allow the Secretary of State to issue passports exclusively for return travel back to the US, which will at least prevent citizens abroad from becoming trapped overseas – perhaps cold comfort, considering the otherwise tough restrictions.

If you owe back taxes to the IRS, the FAST Act could affect you and your family.  Of course, even if your debt falls well short of the $50,000 threshold, it’s still a good idea to get caught up as soon as possible.  Remember: even citizens abroad must file a tax return.  If you owe a tax debt and aren’t sure where to get started, call US Tax Help at (800) 810-9312 to learn about the different options that may be available.  Depending on the circumstances, it may be possible to reduce the amount you owe, or set up a manageable installment agreement.