In recent years, the IRS has been employing a tool to get delinquent taxpayers to pay attention to their debts: passport revocation. These could leave taxpayers in a difficult situation, especially if they live overseas as expats.
When a taxpayer owes $62,000 or more in unpaid taxes, penalties, and interest to the IRS, the IRS can certify their delinquency to the U.S. Department of State. The State Department can then take the taxpayer’s passport, and the taxpayer cannot renew it until they reach a payment plan agreement with the IRS. The IRS can only revoke passports for federal taxes like personal income taxes and may not certify taxpayers as seriously delinquent when they are not under bankruptcy or have entered into an installment agreement with the tax collection agency.
For a free case review from the Tax Law Offices of David W. Klasing, call our Dual Licensed Tax Attorneys and CPAs today at (800) 681-1295.
Why is the IRS Allowed to Revoke Passports from Delinquent Taxpayers?
While being seriously delinquent regarding one’s tax liability is rare, it could happen to taxpayers who move overseas and are unaware of their enduring tax liability or for various other reasons. This could put taxpayers at risk of losing their passports, among other potential consequences.
The IRS typically only uses passport revocation as a last resort to alert taxpayers of serious delinquency. Before taking your passport, the IRS should take certain steps, such as sending you a CP508C notice informing you that you are seriously delinquent and that the agency will be alerting the U.S. Department of State, which could, in turn, take your passport.
This is a somewhat new tactic from the IRS as part of new legislation passed in 2018 aimed at bringing serious delinquency to the forefront of taxpayers’ attention. For expats living overseas, losing their passports could pose considerable hurdles to their ability to travel anywhere, including back to the United States. For domestic taxpayers, losing their passports could mean a loss of extra identification and other difficulties, as it also means they are seriously delinquent. To meet that IRS definition, you must owe more than $62,000 in taxes, a substantial amount. This amount is adjusted annually for inflation.
The IRS also considers any penalties and interest associated with unpaid tax when assessing delinquency. The IRS could impose financial penalties for failure to file and pay, leading to passport revocation if taxpayers ignore penalties and IRS notifications and interest continues to accrue.
What is the Path to Renewing Your Passport After the IRS Revokes It?
The path to renewing your passport after the IRS takes it because you are seriously delinquent starts with setting up a payment arrangement with the IRS or paying the owed amount in full if doing so is within your financial ability.
When you apply to renew your passport, the State Department will notify you that you have 90 days to settle the matter with the IRS. If you do not do so within this timeframe, the State Department will deny your passport renewal request. Because of this, it is important to consider your potential path to repayment before applying for a new passport, though you must have an open application with the State Department to settle the matter with the IRS.
Taxpayers who live overseas when the IRS revokes their passports can seek limited-validity passports for direct return back to the United States so that they can address their tax delinquency with the IRS.
Taxpayers who owe less than $100,000 in combined taxes, penalties, and interest can apply for a short-term payment plan through the IRS, which gives them an extra 180 days to pay the balance in full. Taxpayers may be able to get their passports back when their IRS debt is below the seriously delinquent threshold of $62,000.
If you have imminent travel plans within the next 45 days following passport revocation, the IRS may be able to expedite your request to reverse its certification of serious delinquency to the State Department, but you must provide proof of travel plans and a recent letter from the State Department confirming you have applied for a new passport.
What Kind of Tax Debt Can the IRS Revoke Your Passport For?
The IRS can have the State Department revoke your passport for unpaid federal tax debt above the threshold. This includes debts for unpaid individual income taxes, property taxes, trust fund recovery penalties, and any business taxes for which a filer is personally liable. If interest and penalties continue to accrue on unpaid taxes, taxpayers might reach the threshold for passport revocation without realizing it.
The IRS may not consider certain tax debts toward a taxpayer’s serious delinquency, including child support tax debts, penalties for failure to file a Report of Foreign Bank and Financial Account, or any debts a taxpayer is currently addressing via an IRS-approved installment agreement.
Furthermore, the IRS may not deem a taxpayer seriously delinquent if they have requested an installment agreement from the IRS, have been a victim of tax-related identity theft, or are currently in bankruptcy.
Contact Us Today for Help with Your Case
For a free case assessment from the Tax Law Offices of David W. Klasing’s Dual Licensed Tax Attorneys and CPAs, call (800) 681-1295.
