Americans looking to skip town on Uncle Sam may be in for a rude awakening. The Internal Revenue Service issued a news release last week warning that individuals with large outstanding tax debt remain subject to passport restrictions and may not be able to renew a current passport or apply for a new one. A year ago, the IRS began enforcement of a 2015 law passed by Congress, which requires it to report seriously delinquent federal tax debt, totaling $52,000 or more, to the U.S. State Department.
The law further requires the State Department to deny those individuals their passport application or renewal and permits it to revoke current passports or limit the ability to travel outside the United States. However, before denying a passport application, the State Department will hold the taxpayer’s application for 90 days to allow him to resolve any erroneous certification issues, make a full payment of the debt, including any interest and penalties, or enter into a satisfactory payment arrangement with the IRS.
Available Relief Programs
To avoid disruption to travel plans, affected individuals must act promptly to resolve the debt. The IRS is offering a variety of options to do so, including numerous online tools. One available program is setting up a monthly payment plan. Another option is an offer in compromise, an agreement settling the tax liability for less than the full amount owned. The IRS will look at a taxpayer’s income and assets to determine the taxpayer’s ability to pay, however, meaning high-net-worth clients will not likely qualify for this program. An Offer in Compromise Pre-Qualifier tool is available on the IRS’ website to help taxpayers decide if they’re eligible.
A few exceptions to enforcement of the restrictions exist; for example, individuals in bankruptcy, those claiming “innocent spouse” relief, and victims of tax fraud or natural disaster aren’t at risk. The IRS will also postpone notification of delinquency for taxpayers currently serving in a combat zone.
Decertification
The IRS will reverse the taxpayer's certification within 30 days after the taxpayer has paid the debt in full or entered into an acceptable payment arrangement. The process can be expedited for those with imminent travel plans or an urgent need for a passport.