The Internal Revenue Service (IRS) recently reminded taxpayers with outstanding tax debt what is at risk. More specifically: their passports. A failure to pay off tax debt can result in the loss of the taxpayer’s passport.
How can the IRS take away a taxpayer’s passport? The federal agency was granted this power through a law passed by Congress in 2015. Essentially, the IRS sends a list of names of taxpayers with qualifying debt to the State Department. The State Department will then deny new or renewed passport applications for these individuals.
Who is at risk? Taxpayer with a tax debt over $51,000 could lose their passport.
How often does the State Department really deny these applications? Fairly regularly. A recent piece in the Wall Street Journal notes a spokesman for the State Department has confirmed that some denials have already been issued. The process reportedly began in February. This year, at least 362,000 taxpayers are at risk of losing their passports based on this law.
What if I have a current passport? At this time, the agency is only denying renewals or new applications. Those with current passports are likely able to continue to travel.
What should I do if I have qualifying tax debt and am at risk for losing my passport? It is wise to take proactive action to pay off the debt. Various methods are available that can make the process more manageable. Depending on the details of the situation, an installment agreement or offer in compromise with the IRS may be an option.
The IRS notifies the taxpayer at about the same time it sends the list to the State Department. For those who wish to travel abroad, there is not a lot of time to resolve this matter. Those who wait for notification could find themselves battling the State Department even after finding a resolution to their tax controversy. Taxpayers can reduce this risk by proactively addressing the problem.