Your Passport Can Be Revoked For IRS Back Taxes
A new tax law on the books allows the federal government to revoke your passport if you owe back taxes.
Before you book that next trip from New York to some warm sunny climate, you may need to make sure that your back tax problems have been resolved.
Section 7345 of the Internal Revenue Code
Section 7345 of the Internal Revenue Code will allow the federal government to revoke your passport if you have a “seriously delinquent tax debt.” Also, the same law will prevent you from being issued a passport if owe back taxes to the IRS.
Why the New Tax Law was passed?
The Government Accountability Office saw the potential to collect back taxes if they governed the ability to issue passports. This bill, signed by President Barack Obama, was passed as part of Fixing America’s Surface Transportation Act, a highway funding bill.
It is now Section 7345 of the Internal Revenue Code.
How Section 7345 of the IRC Will Work
In sum and substance, the IRS can possibly take your passport if you owe back taxes.
First, the IRS will submit certifications of “serious delinquent” taxpayers to the Secretary of the Treasury ( What this means is the IRS will create a list of people that owe back taxes).
Then, the Secretary of Treasury will pass those certifications ( the list of seriously delinquent taxpayers) to the Secretary of State.
When you are sent that certification from the Secretary of State, you will have the right to challenge the certification in Court.
The Secretary of State will be required under the new tax law to deny you a passport if you are applying or revoke an issued passport if you have a seriously delinquent tax debt.
What is a Seriously Delinquent Tax Debt?
A seriously delinquent tax debt means an outstanding tax liability in an amount in excess of $50,000. This amount includes penalties and interest.
For example, you may owe the IRS 25,000 in taxes from tax year 2007. However, there are penalties and interest that compound the tax liability. With penalties and interest, your tax liabilities may have easily grown to in excess of $50,000.
As well as owing in excess of $50,000, the federal government must do one of the following prior to revoking or denying your passport:
A Notice of Lien must have been filed in the public records as per Internal Revenue Code Section 6323 or
A Notice of Levy has been filed pursuant to Internal Revenue Code Section 6331
When a tax debt reaches this level, it is almost a matter of course that the IRS has filed a Notice of Federal Tax Lien or has issues a Notice of Levy.
However, a review of your tax problem by an experienced tax attorney will help you determine if either of these collection efforts have been undertaken by the IRS.
Three Exceptions to the Law
If the tax debt is being paid in a timely manner pursuant to an installment agreement (also known as a payment plan).
There is a pending collection due process hearing (an administrative process to contest various collection methods).
There is a an emergency or humanitarian situation. This is an administrative exception and the specifics of this exception have yet to be flushed out.
We do not yet know whether a processed offer in compromise will also fall into the exceptions.
For example, if a taxpayer is submitting an offer in compromise as to doubt as liability, he is contesting the validity of the tax debt liability.
If the taxpayer does not possibly owe the tax and the offer is under consideration by the IRS should his ability to travel be hindered? Issues like this may be addressed as this new tax law gets applied to various scenarios.
When the Tax Debt is NO Longer Delinquent...
If you have reached an agreement with the IRS regarding your back tax liability, the Internal Revenue Service must notify the State Department that your tax debt is no longer seriously delinquent. As such, you should then be able to get your passport reinstated.
Does This Law Apply to State Tax Debt?
This law only applies to seriously delinquent federal tax debt. In other words, back taxes due to the IRS and not your state taxing authorities.
However, it would not be surprising to see certain aggressive state taxing authorities, like New York, try to implement a similar strategy in the future.
For example, the New York State Department of Taxation and Finance has had great success in collecting back tax liabilities by revoking driving privileges.
Thousands of New Yorkers with back tax problems are forced to account for their past due taxes every year when the revocation of the all important driver’s license is at stake.
It is the privilege to leave and enter the USA going to be next ?
Section 7345 of the Internal Revenue Code has broad implications. It doesn’t just affect taxpayers who are looking to go on vacation.
It affects many people who travel abroad on a regular basis as a result of business dealing overseas.
It also affects those who live outside of the United States and may be trying to re-enter the States or perhaps use their passport as a means of identification.
It is now clear that the IRS can take your away your ability to travel as a result of your past due taxes. We will to see how this tax law will be interpreted and applied.
It is apparent that the federal government is getting more aggressive in their quest to collect back taxes. From the hiring of private debt collectors to the rescinding of passports, it is obvious that the IRS is not going to forget about your back tax liability.
If your passport can revoked and your freedom to travel rescinded, we have to ask what’s next?
We recommend that you deal with back tax issue now before we see additional laws put into place that hamper your ability to live. Contact the New York tax attorneys of the Tax Problem Law Center at 516.620.5944. We help clients solve their IRS and state tax problems every day.