As we’ve written about before, a new law passed on December 4, 2015 that gives the Secretary of State the authority to refuse or revoke passports to “seriously delinquent” taxpayers. While the program has been slow to roll out, we do have some passport revocation updates.
H.R.22 – Fixing America’s Surface Transportation Act, or The ‘FAST Act’ is a highway transportation bill. It covers such things as highway, transit, and rail maintenance and safety. Oh, and it also amends the Internal Revenue Code with respect to passport revocation in cases of certain unpaid taxes.
Makes sense, right?
Trouble for all involved
The procedure details we know so far:
The IRS must submit certifications of “seriously delinquent” taxpayers to the Secretary of the Treasury, who must then pass along these certifications to the Secretary of State. The Secretary of State will then be REQUIRED to deny such person a passport if they are applying, or revoke a passport that has already been issued. What makes a taxpayer “seriously delinquent”? It is someone who owes over $50,000 in taxes – including penalties and interest.
This will also add yet another burden to expats. For them, their passport is their main form of identification. TIGTA did an investigation on IRS correspondence that is mailed to overseas addresses. Their findings:
“IRS data systems are not designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable. Other factors complicate the delivery of international mail, making its delivery less certain than domestic correspondence.”
In addition, the IRS generally does not know if international taxpayers receive the tax correspondence sent to them. Without specific controls to monitor and metrics to measure international tax correspondence, the IRS cannot determine the impact of its international tax correspondence on taxpayer compliance.
For those living overseas, they may have tax issues they aren’t even aware of. Add to that the fact that if you live overseas, the time the IRS has to collect a tax debt runs forever. A simple tax debt can easily go over the $50,000 threshold as penalties and interest accrue very quickly. For example, if in 1995 you owed $15,000 to the IRS, you would now owe approximately $51,000.
Passport Revocation Updates
We’ve had people call us here at the law firm saying things like “I think my passport has been revoked!” We do know that so far, the system to revoke passports for back taxes owed has not officially been implemented. When it is, the first thing that will happen is that you will receive a notice from the Secretary of the State (unless they are trying to deliver to an international address…then maybe you won’t receive it).
Receiving the notice is actually a good thing, as you will be given the opportunity to address the issue before they take your passport away. Take advantage of this opportunity; some good options may be submitting an Offer in Compromise or getting into some sort of payment program like an installment agreement.
As of right now, you will not be safe if you file as “Currently not Collectible”. This is frustrating, and we will continue to monitor to see if they add this as a viable option.
The Secretary of State is authorized to make exceptions to these rules for “emergency or humanitarian” purposes but they have not outlined those parameters as of yet.
A provision has been made to the FAST Act that if the Secretary of State decides to revoke a passport, that passport may be made valid ONLY for return travel to the United States. This Act also allows the Secretary of State to issue a limited-use passport (after the revocation of a passport) that acts as a one-way, one-time passport for return travel to the United States. So you’d either be stuck in the country you are in, or you’d be forced to come back to the States to address the issue. This would be potentially detrimental to those living overseas; if they are travelling and end up being forced to return to the US they would literally only have the clothes on their back and whatever they are travelling with.
Check back for updates as there are many details that still need to be worked out. We don’t know if there will actually be IRS or Secretary of the State employees camped out at airports, we don’t know time frames from the time of first contact to actual passport revocation, or if they are going to do anything to address the issues with foreign mailing addresses. As soon as we get these updates we will pass them on to you.
Our advice? Address the issue before they roll out the program details. It will be quicker and easier to work through it now than trying to manage all the red tape they are sure to implement.
If you need assistance with a tax issue, contact us to schedule a free, confidential consultation. You can email us at firstname.lastname@example.org or call 888-727-8796. You can also learn more about our services and fees here.
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