International travel is a necessity for many. It is often the only way to complete a deal or see loved ones in a home country.
Soon an unpaid tax bill could keep these travelers grounded. The provision was quietly tucked into a piece of legislation passed late last year – the Fixing America’s Surface Transportation (FAST) Act. The new rule allows the Internal Revenue Service to ask the State Department to deny or revoke passports when a taxpayer owes more than $50,000 in back taxes.
The first quarter of the year finished without news that any passports had been revoked or denied.
However, the IRS estimates as many as 12 million taxpayers have delinquent accounts. How many of these above the threshold? No one knows exactly, but the $50,000 figure includes penalties and interest.
When could the new rule take effect? The IRS said in a statement to CNBC that it “continues to review the legislation and is taking steps to begin implementation of the program as soon as feasible.”
Notice and avoidance
Generally, there will be some sort of other enforcement action that occurs before the IRS takes action to revoke a passport. A notice of a lien is one, but depending on a change of address and mail forwarding this might not reach a taxpayer. Will another separate notice explaining that a passport is in jeopardy be sent? This IRS is likely still working out these details with the State Department.
One way to seek an exemption from the new rule is through a tax installment agreement. These payment plans can often be stretched out over five years and are available to those who owe less than $50,000.
Ensure your passport remains valid for travel, so that plans booked months in advance are not ruined. If you've been ignoring an unpaid tax liability, speak with a tax attorney about your options to get back on track.