In 2015, a provision tucked into the Fixing America’s Surface Transportation Act (FAST Act) added another IRS enforcement tool. The IRS was authorized to work with the State Department to deny or revoke U.S. passports.
Who is affected? American taxpayers who owe more than $51,000 in back taxes (penalties and interest are included in this inflation-adjusted figure). When did the IRS start sending names? Over the summer, the IRS began the process of notifying the State Department of the more than 300,000 taxpayers who fall into the category.
Denial or revocation?
While the law allows for revocation of passports, so far the agencies are targeting passport application denials. If your name appears on the list and you apply to renew your passport, the State Department would deny your request. The same goes with an initial application for a passport.
The IRS will send notice of a certification to you, the taxpayer, and the State Department at the same time. Because there is no advance notice, it’s crucial to take action if you owe back taxes and need a valid passport for international travel.
Staying off the list may be easier than getting off the list
Paying a tax debt in full would avoid certification. A Wall Street Journal story mentioned one taxpayer who paid more than a million dollars to avoid having a passport denied. Results attributed to the new tool have already topped $11 million.
If you cannot pay the full balance, an installment agreement with current payments is another way to stay off the list. When you disagree with an assessment a collection due process hearing or a request for innocent spouse relief will also prevent certification.
Speaking with a tax attorney about your unique situation is the only way to learn what options are available to keep a valid U.S. passport. And proactively resolve the issue, so it does not become an emergency that affects your upcoming itinerary.