If you're one of the several hundred thousand U.S. taxpayers who the IRS deems to have a "seriously delinquent" tax debt, be warned: Your U.S. passport may be in jeopardy.
In 2015, President Barack Obama signed into law the Fixing America's Surface Transportation Act, or FAST Act. It requires the U.S. State Department to deny renewal of -- and even revoke -- the passports of individuals who the IRS identifies as having delinquent tax debts.
The tax agency recently provided new details on its enforcement of the FAST Act, stating it's in the process of sending the names of at least 362,000 individuals who owe $51,000 or more in delinquent taxes. According to an IRS spokesperson, it will send the names to the State Department in batches, and it expects to have sent the entire list by year-end.
According to recent reports, the enforcement actions taken to date have already had an impact. The State Department confirmed it has denied passports to an undisclosed number of tax debtors. The IRS confirmed that it has collected over $11.5 million from 220 individuals, with one debtor paying over $1 million to avoid passport denial.
The specifics of how the enforcement of the law works are spelled out in a section of the FAST Act titled Revocation or Denial of Passport in Case of Certain Tax Delinquencies. The IRS said for now authorities are denying renewal of passports rather than revoking them. But the law does allow the State Department to cancel current passports of tax debtors.
Enforcement of the law has its critics, who say that because the IRS notifies tax debtors at about the same time it sends their name to the State Department, they don't have enough time to resolve the debt and allow the IRS and the State Department to lift the passport restrictions. Critics would also like the notices the IRS sends to individuals to be clearer about situations that are exempt from the law.
Under the law, the IRS defines a delinquent debtor as a person owing a legally enforceable tax liability of more than $51,000 in 2018. This includes the tax, penalties and interest, which can add up fast. A tax lien must be filed, and all administrative remedies for lien relief must have lapsed or been denied. It also includes those who have been issued a tax levy.
When a taxpayer who is on the delinquent list applies for or renews a passport, there's a 90-day process for resolving erroneous IRS certifications or for getting back in good standing for past-due taxes (such as establishing a payment plan with the IRS). But there's no grace period for resolving these issues before the State Department revokes a passport.
The IRS won't report individuals who fall under the following situations:
- Those who've entered an installment agreement with the IRS to pay their taxes
- Those who've settled their tax debt through an offer in compromise or a Justice Department agreement
- Those who appeal a tax levy through an IRS collection due-process hearing
- Those who've request innocent spouse relief by filing Form 8857
Also excluded are individuals serving in a combat zone, living in a federal declared disaster area, in a bankruptcy proceeding, have debts in a noncollectable hardship status or who are victims of identity theft.
For tax debtors who want to keep their U.S. passport privileges, the most expedient way to avoid being placed on the IRS list is to enter into an installment agreement with the agency and begin making payments.
If you think you may be subject to a passport restriction because of a tax debt, don't wait until your next travel abroad. Instead, call the National Passport Information Center at 877-487-2778 to inquire about your situation. If you owe back taxes, hire a tax professional to advise you on the various arrangements to settle your debt with the IRS, or contact the IRS at 800-829-1040.