Do you take your passport for granted? The Internal Revenue Service has a new enforcement tool that could ground international travelers.
The power to revoke passports was included in the FAST Act, a highway funding bill, that Congress passed on December 4, 2015. The new law has been codified in Section 7345 called "Revocation or Denial of Passport in Case of Certain Tax Delinquencies." This blog will discuss how this change could affect you.
Few administrative details are available. What we know is that the IRS will be able to send the U.S. State Department a list of people who owe more than $50,000 and are not working to resolve the debt. If your name appears on the list, the State Department could deny your passport application, renewal request and even rescind your valid passport.
A large tax bill can occur with the sale of a home or a business. Taking a disbursement from retirement accounts can also result in back taxes. The IRS communicates via U.S. mail. If you spend part of the year in Europe or Asia, you need to ensure you receive mail. Do not put your passport in jeopardy from a tax debt you didn't know about.
What can you do if you owe substantial back taxes?
Negotiating an installment agreement to pay your overdue taxes would allow you to keep your passport. However, IRS budget cuts have resulted in staffing shortages. Slower response times to installment agreement requests are the new norm. Six months can easily go by with no response. Communication between the IRS and State Department may add even more time waiting on a valid passport.
Promptly working to resolve back taxes is the only way to protect your passport as this new law goes into effect.
Source: Forbes.com, "2016 Brings IRS Power Over Passports, Use of Private Debt Collectors," Robert Wood, Jan. 4, 2016