The IRS is now enforcing passport restrictions against people with substantial amounts of delinquent tax debt.
If you are an expat living abroad, or just want to be able to use a passport to travel outside the U.S., you could be affected.
Here are five things to know about tax debt and passport restrictions.
For the IRS to deny a passport for tax debt, the debt must be “legally enforceable.”
For the IRS’s attempt to collect tax debt to be legally enforceable, the agency must have followed proper collection procedures. This means one of two things:
- The IRS has properly filed a notice of federal tax lien and the taxpayer has exhausted or failed to exercise administrative remedies available under the Internal Revenue Code; or
- The IRS has issued a valid levy.
To result in passport denial, tax debt must be “seriously delinquent.”
In dollar terms, the IRS has defined seriously delinquent tax debt as $51,000. This amount includes interest and penalties.
Certain types of tax debt are not considered seriously delinquent even if they exceed $51,000 and are legally enforceable.
Debt that are not defined as seriously delinquent includes those that are being paid in a timely manner through an installment agreement or offer in compromise approved by the IRS.
Tax debt that is the subject of an upcoming collection due process hearing requested in a timely manner is also not considered delinquent.
The same is true of tax debt for a taxpayer who qualifies for innocent spouse relief or is in bankruptcy proceedings.
The restrictions also do not apply to failure to file the Report of Foreign Bank and Financial Accounts (FBAR).
The IRS program has already forced many people to pay or make plans to pay tax debt.
Since it began enforcing the new rules on tax debt and passports in February, the IRS has collected $11.5 million from 220 people who paid the entire amount of their back taxes. Another 1,400 have entered into agreements to pay.
By the end of the year, the IRS estimates up to 362,000 taxpayers could be impacted by the passport restrictions.
For expats, delays in getting mail can complicate the issue of receiving notice about passport status.
The IRS generally sends notices to someone’s last known mailing address. For someone living abroad, this can be a problem if the last known address was in the United States.