Revocation or Denial of US Passport in Case of Certain Unpaid Taxes
The IRS has provided further details on the implementation of a provision within the Fixing America’s Surface Transportation Act of 2015, the “FAST Act,”, which could significantly curtail the ability of Americans with “seriously delinquent tax debt” to work, live, and travel overseas. IRC § 7345 authorizes the IRS to certify that debt to the State Department for action. Upon receiving certification, the State Department shall deny the taxpayer’s passport application and/or may revoke the current passport. If the taxpayer’s passport application is denied or the passport is revoked and the taxpayer is overseas, the State Department may issue a limited validity passport good only for direct return to the United States.
Seriously delinquent tax debt
“Seriously delinquent tax debt” is defined as at least $50,000 of accumulative assessed tax debts, including interest and penalties. This threshold for calendar year beginning after 2016 will be indexed annually for inflation. Additionally, the taxpayer will have had to exhaust all avenues of appeal and the IRS will have had to issue the appropriate liens. If the taxpayer is working on an installment agreement or offer-in-compromise, it is our understanding that the IRS will not be sending those names to the Department of State. Once the taxpayer is on the passport revocation list at the State Department, to be removed taxpayers must:
- Pay in full;
- Enter into a payment agreement;
- Win a section 6330 hearing; or
- Win innocent spouse relief.
The IRS will not reverse certification where a taxpayer requests a collection due process hearing or innocent spouse relief on a debt that is not the basis of the certification. Also, the IRS will not reverse the certification because the taxpayer pays the debt below $50,000.
Take action to keep your US passport
Since this will essentially involve multiple notices, you will have ample opportunities to resolve such debts with the IRS by contesting any erroneous assessments or arriving at an installment agreement or offer-in-compromise. Even if you are not able to settle your tax debt in full immediately, you should still respond to your IRS notices by the applicable deadlines and keep the dialog going until you reach a resolution. Should you or your expatriate employees require any assistance, please do not hesitate to contact our office.
Status update on IRS certification of tax debt to the State Department
The IRS intends to implement the process in early 2017 but has not yet started certifying tax debt to the State Department. Updates on the process will be posted on the IRS website.
American Expatriate Tax is a part of Contexo Global Mobility Solutions & Tax Consulting Ltd. registered in Hong Kong. Together, we help companies and individuals navigate through the complexities of global mobility and related tax issues. Here is where you will find a blend of expertise from Big 4 accounting firms and Fortune Global 500 companies but the attention of a boutique consulting practice. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.