If you owe taxes to the IRS, the agency has many ways of making your life miserable. This December, President Obama signed a bill that gives the IRS a new tool in its arsenal. The five year infrastructure spending bill, specifically H.R. 22: Fixing America’s Surface Transportation Act, also known as the Fast Act, adds a new section to the Internal Revenue Code. This new section is called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” As a result, the IRS can potentially take your passport if you have unpaid taxes.
An Overview of the New Code Section Giving the IRS Power Relating to Your Passport
Back in 2012, the Government Accountability Office first reported that there was a significant potential upside for the IRS if they used the issuance of passports as a means to collect taxes. It did not pass as a bill at the time; however, it passed as part of the massive highway funding bill in this most recent effort. According to the law, the following is now true:
- The U.S. State Department may now revoke, deny, or limit passports for anyone who the IRS certifies as having a seriously delinquent tax debt.
- A seriously delinquent tax debt means a debt in excess of $50,000.
- This could mean that no new passports will be issued to those with seriously delinquent tax debt. It could also mean that no passport renewals will be performed for those with seriously delinquent tax debt. Further, it could also mean that the State Department may rescind existing passports for those with this level of tax debt.
- The list of affected taxpayers will be compiled by the IRS.
- The $50,000 minimum threshold amount may include penalties and interest and applies only to unpaid federal taxes, not state taxes.
- The State Department will take action when told to do so by the IRS.
- Taxpayers who are contesting a proposed tax liability administratively with the IRS or in court should not be a part of the list compiled by the IRS, as these amounts are not yet a tax debt.
- There is also an administrative exception. The State Department can issue a passport in an emergency for humanitarian reasons.
- Taxpayers who are paying their debt in a timely manner, such as under an installment agreement, should not face any issues with their passports.
- The State Department’s new powers relating to passports may apply as soon as the IRS files a notice of lien.
Unfortunately, with the bill being so new, there is little in the way of administrative guidance to offer insight as to how this new section of the Code will be applied and used. In addition, it is also not yet known how the exception to the rule will be carried out. We also do not know how long it would take to be granted this reprieve.
While the $50,000 minimum may at first seem high, it is important to note that statistically, this amount is not high, especially when interest and penalties begin to accrue. The IRS files tax liens on a regular basis so it is likely that the power to interfere with your passport will kick in quickly if you owe a debt.
In addition, some people mistakenly believe that since they do not travel internationally, their passport is not necessary and therefore the IRS’s powers relating to this form of identification is irrelevant. It is important to note, however, that passports are used for many different purposes other than international travel. Some people may also soon find that passports are required even for domestic travel.