Two weeks ago, we noted the legislation proposed by U.S. Senators Bob Casey and Charles Schumer designed to address the increasing number of Americans who are renouncing their citizenship. That bill would increase the penalties on those whom the Internal Revenue Service deems to have given up their passports to engage in tax evasion.
While some have expressed doubts about the bill's eventual chances of enactment, there is another piece of related legislation that may have better odds of being signed into law. To curtail travel outside of the country and to provide an incentive for increased compliance with the tax laws, this other piece of proposed legislation would preclude the government from issuing a passport to anyone with a tax debt over $50,000. Those who already have passports would have them voided.
The same penalty would apply to taxpayers whose property has become subject to an IRS levy or lien. Congress appears to have been galvanized by a Government Accountability Office investigation that revealed over 224,000 people who owed back taxes to the IRS received passports from the State Department. Their combined tax debt was approximately $6 billion.
The passport-restriction legislation has already received the necessary approval from the Senate and awaits a vote in the House. The law would exempt those who can prove that they would suffer demonstrable hardship if they were denied a passport. But this proposed law demonstrates the government's growing commitment to capture uncollected revenue and punish those who do not comply with the Tax Code.
It is therefore important that those who owe money to the IRS know what options they have to pay off and eliminate their tax debts.
Source: The Wall Street Journal, "New Taxes for 'Renouncers'?" Laura Saunders, May 25, 2012.