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Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes
IRS officials provide new details on enforcement of law Congress passed in late 2015
At least 362,000 Americans with overdue tax debts will be denied new or renewed passports if they don’t settle these debts, the Internal Revenue Service says.
Recently IRS officials have provided new details on the enforcement of a law Congress passed in late 2015. It requires the IRS and State Department to deny passports or revoke them for taxpayers who have more than $51,000 of overdue tax debt. Enforcement began in February.
An IRS spokesman says the 362,000 people are current tax debtors who are affected by the law. The IRS is sending their names in batches to the State Department, a process the tax agency aims to finish by year’s end. A State Department spokesman confirmed that it has already denied passports to some debtors.
IRS Division Commissioner Mary Beth Murphy said in late June that for now U.S. authorities are denying passports rather than revoking them. So, many tax debtors with current passports should be able to travel abroad, but they won’t be able to renew their passports; those without passports will be denied them if they apply.
The new enforcement is having an effect: Ms. Murphy said that one tax debtor paid $1 million to avoid passport denial. As of late June, 220 people had handed over $11.5 million to pay their debts in full, and 1,400 others had signed installment agreements, according to an IRS spokesman.
National Taxpayer Advocate Nina Olson is critical of some of the new procedures, however. One objection is that the IRS notifies a tax debtor at roughly the same time it tells the State Department that someone qualifies for passport denial. This may not leave enough time to resolve tax issues and have the IRS and the State Department lift restrictions, she said.
Instead, Ms. Olson would like the IRS to warn debtors 30 days before the agency sends their names to the State Department. She said this is similar to what the Department of Health and Human Services requires before someone is denied a passport because of $2,500 or more in unpaid child support.
Ms. Olson would also like the IRS to provide information in its letter to debtors about all exemptions from the new law, and for the State Department’s letter to include information about emergency and humanitarian exceptions. The current letters don’t do this, she said.
While officials sort out such issues, here’s what to know about the new enforcement:
Tax debtors at risk. Taxpayers can have passports denied if they have “seriously delinquent” tax debt of more than $51,000, adjusted for inflation. This amount includes assessed tax, penalties, and interest, but it doesn’t include “Fbar” penalties for not reporting foreign financial accounts, according to an IRS spokesman.
To be at risk of passport denial, a taxpayer must typically be subject to a lien, which advises creditors of a debt to the IRS, or a levy, which gives the IRS the authority to seize assets.
Tax debtors not at risk. Taxpayers typically aren’t subject to passport restrictions if they’re contesting an assessment administratively or in court, or if they have pending or current installment-payment agreements or offers-in-compromise with the IRS.
Also excluded are many taxpayers who are victims of identity theft; have requested “innocent-spouse” relief; have debts in “not-collectible” hardship status; are in bankruptcy; are in a federally declared disaster area; or are serving in a combat zone.
In addition, the State Department can issue a passport for emergencies or humanitarian reasons. A department spokesman said it does so to make sure an American citizen overseas can return to the U.S.
What happens. The IRS sifts through its records looking for tax debtors covered by the law and sends a letter to them at about the same time it sends their names to the State Department.
The letter to the debtor warns that his or her passport won’t be issued or renewed unless the debt is resolved and that the State Department also has the power to revoke the passport.
If a debtor then applies for a passport, the State Department holds the application open for 90 days. If the issues aren’t resolved within that period, the taxpayer needs to reapply for a passport.
Caveats for expats. An IRS spokesman said the agency is sending passport letters to tax debtors both in the U.S. and abroad. This raises issues for U.S. citizens living abroad because of IRS problems with international mail.
In 2015, the Treasury Inspector General for Tax Administration, a watchdog agency, noted that “IRS data systems aren’t designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.”
Some expats maintain a U.S. address or give a power-of-attorney to a U.S. person to ensure that official mail doesn’t go astray.
Now that Congress is using passport denial to collect tax debts, there is more reason to take such steps.
Write to Laura Saunders at laura.saunders@wsj.com
Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes
IRS officials provide new details on enforcement of law Congress passed in late 2015
At least 362,000 Americans with overdue tax debts will be denied new or renewed passports if they don’t settle these debts, the Internal Revenue Service says.
Recently IRS officials have provided new details on the enforcement of a law Congress passed in late 2015. It requires the IRS and State Department to deny passports or revoke them for taxpayers who have more than $51,000 of overdue tax debt. Enforcement began in February.
An IRS spokesman says the 362,000 people are current tax debtors who are affected by the law. The IRS is sending their names in batches to the State Department, a process the tax agency aims to finish by year’s end. A State Department spokesman confirmed that it has already denied passports to some debtors.
IRS Division Commissioner Mary Beth Murphy said in late June that for now U.S. authorities are denying passports rather than revoking them. So, many tax debtors with current passports should be able to travel abroad, but they won’t be able to renew their passports; those without passports will be denied them if they apply.
The new enforcement is having an effect: Ms. Murphy said that one tax debtor paid $1 million to avoid passport denial. As of late June, 220 people had handed over $11.5 million to pay their debts in full, and 1,400 others had signed installment agreements, according to an IRS spokesman.
National Taxpayer Advocate Nina Olson is critical of some of the new procedures, however. One objection is that the IRS notifies a tax debtor at roughly the same time it tells the State Department that someone qualifies for passport denial. This may not leave enough time to resolve tax issues and have the IRS and the State Department lift restrictions, she said.
Instead, Ms. Olson would like the IRS to warn debtors 30 days before the agency sends their names to the State Department. She said this is similar to what the Department of Health and Human Services requires before someone is denied a passport because of $2,500 or more in unpaid child support.
Ms. Olson would also like the IRS to provide information in its letter to debtors about all exemptions from the new law, and for the State Department’s letter to include information about emergency and humanitarian exceptions. The current letters don’t do this, she said.
While officials sort out such issues, here’s what to know about the new enforcement:
Tax debtors at risk. Taxpayers can have passports denied if they have “seriously delinquent” tax debt of more than $51,000, adjusted for inflation. This amount includes assessed tax, penalties, and interest, but it doesn’t include “Fbar” penalties for not reporting foreign financial accounts, according to an IRS spokesman.
To be at risk of passport denial, a taxpayer must typically be subject to a lien, which advises creditors of a debt to the IRS, or a levy, which gives the IRS the authority to seize assets.
Tax debtors not at risk. Taxpayers typically aren’t subject to passport restrictions if they’re contesting an assessment administratively or in court, or if they have pending or current installment-payment agreements or offers-in-compromise with the IRS.
Also excluded are many taxpayers who are victims of identity theft; have requested “innocent-spouse” relief; have debts in “not-collectible” hardship status; are in bankruptcy; are in a federally declared disaster area; or are serving in a combat zone.
In addition, the State Department can issue a passport for emergencies or humanitarian reasons. A department spokesman said it does so to make sure an American citizen overseas can return to the U.S.
What happens. The IRS sifts through its records looking for tax debtors covered by the law and sends a letter to them at about the same time it sends their names to the State Department.
The letter to the debtor warns that his or her passport won’t be issued or renewed unless the debt is resolved and that the State Department also has the power to revoke the passport.
If a debtor then applies for a passport, the State Department holds the application open for 90 days. If the issues aren’t resolved within that period, the taxpayer needs to reapply for a passport.
Caveats for expats. An IRS spokesman said the agency is sending passport letters to tax debtors both in the U.S. and abroad. This raises issues for U.S. citizens living abroad because of IRS problems with international mail.
In 2015, the Treasury Inspector General for Tax Administration, a watchdog agency, noted that “IRS data systems aren’t designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.”
Some expats maintain a U.S. address or give a power-of-attorney to a U.S. person to ensure that official mail doesn’t go astray.
Now that Congress is using passport denial to collect tax debts, there is more reason to take such steps.
Write to Laura Saunders at laura.saunders@wsj.com
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