For anyone that may have some overdue income taxes and intends to travel anywhere out of the country, now may be the best time to start paying those off or risk being grounded. Earlier this month, Congress passed an enforcement provision that gives the government the power to revoke the passports of seriously delinquent taxpayers.
The new law stipulates that anyone who has an outstanding balance of $50,000 or more with the Internal Revenue Service now runs the risk of having their U.S. passports taken away by the State Department courtesy of The Department of the Treasury and the IRS.
The full details of the agreement have yet to be completely solidified, but the fact that the government has granted power to revoke passports suggests that the collection of the country’s growing unpaid tax debt amount is very much becoming a priority. In 2014, the IRS reported that there were over 12.4 million delinquent accounts in existence and with taxes, interest and penalties the debt owed amounted to nearly $131 billion in assessed taxes.
December 4 saw President Obama signing the bill, named the FAST Act highway-transportation bill, and it goes beyond just granting the IRS the chance to get their unpaid taxes by revoking passports. The act also seeks to give private debt collectors a chance to force taxpayers into actually paying their debts. A mandate stipulating that the Internal Revenue Service relinquish a portion of ‘inactive’ delinquent taxes to private debt collectors has been written into the act. If the IRS has already tried and failed to collect because they are unable to locate the taxpayer or the tax liabilities are outstanding for more than a year the account will be outsourced.
USA Today has written that according to Matthew D. Lee, of Blank Rome law firm, the passport-revoking provision can be authorized by the Department of the Treasury and the IRS once the delinquent taxpayer has racked up over $50,000 and the IRS has gone through the effort of filing a lien or levy against the individual. Lee described the passport-revoking provision, through a blog, as a “powerful tool to force tax compliance.”
The State Department’s authority will actually extend beyond simply revoking passports actually and they can deny applications as well as limit the use of these delinquent taxpayer’s U.S. passport. Indeed no one who owes that amount of money will be issued a passport unless it is for humanitarian reasons or an emergency. Fortunately, if an American happens to be out of the country when their passport is revoked will be allowed to return home. Any taxpayers who would be affected will receive written notice prior to the revoking of their passports. The amount of valid U.S. passports issued has risen greatly in recent years, moving from approximately 30 million in 1995 to 126 million this year.
Taxpayers who have already entered into deals to pay the IRS, for example by installments or offers in compromise, will not be affected by the new provisions. Person’s who are seeking innocent-spouse relief or claiming hearings will also not be affected.
Tom Wheelwright, a certified public accountant, believes that the $50,000 limit may be a little too low, since accumulating that much debt is not hard if a person lost their job or happened to incur big medical bills. Wheelwright also points out that contacting the IRS is also extremely difficult for the average person and even most tax professionals have to wait an average of 90 minutes to get through. According to RT however, persons usually receive three or four IRS notices over three to six months before their account goes into the collection stage.
Some experts are claiming that most persons with severe delinquent accounts may not be entirely concerned with losing their US passports since they tend to be living in other nations and hold dual citizenship.
Analysts are expecting the passport-revocation rule to bring in about $400 million over the next 10 years and the IRS has stated that they are reviewing the new provisions and working to implement the act as soon as possible.
[Photo Courtesy of LifetimeStock/Shutterstock]