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Owe taxes: Could your passport be seized at the border?

The best answer we can provide is probably not.

If you owe a significant tax debt, your passport could soon be in jeopardy. A provision in the FAST Act granted the Internal Revenue Service another tax collection tool: the ability to revoke, deny or limit passports.

The law requires the IRS to work with the Treasury and State Departments. The IRS will compile a list of taxpayers who it certifies have serious delinquent tax debt. The threshold appears to be $50,000, but includes interest and penalties.

"As soon as feasible"

The IRS is still reviewing the law before it starts implementation. There is currently little solid information about what the IRS will actually do with its new enforcement ability.

The language of the law suggests a two-step process.

First, the Service needs to submit a certification to the Treasury Department stating a taxpayer has a "seriously delinquent tax debt" - above the $50,000 threshold. Second, the Treasury passes that certification to the State Department for action.

The IRS needs to notify you when a certification is submitted. But must it notify you before submitting the certification? This is unclear from the language of the law. How notification will be sent is another question.

Our best guess is that this new power will be exercised at the application level. This could therefore pose a problem when applying for a new passport.

OVDP

If you have an undisclosed foreign account, you may be seeking to come into compliance through the Offshore Account Disclosure Program. While the penalties are reduced they can still lead to significant tax liability.

Contesting the amount you owe administratively or in court should not count against you. Administrative exceptions also exist for humanitarian reasons.

One way to avoid the new enforcement action is to finalize an installment agreement. Payments on the plan would show your intent to pay the tax liability in a timely manner. If you have questions, call Brown P.C to schedule a consultation with one of our experienced tax attorneys. We can explain how the new law might affect you.

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