The IRS has adopted a relatively new method of forcing delinquent taxpayers to settle their debts. If you owe more than $53,000 in back taxes, you may be prohibited from renewing your passport or applying for a new passport.
When will the IRS move to restrict your travel?
In order to put passport restrictions in place, the IRS must inform the U.S. State Department that a traveler has significant tax debt. The IRS states that it will only take this measure when:
- A federal tax lien has been filed
- All administrative remedies have been exhausted or deadlines have expired
- A levy has been issued
You should receive a notice if the IRS is planning on informing the U.S. State Department of your delinquent tax status.
The IRS will not inform the State Department of all types of tax debt
Perhaps to prove that they aren’t entirely heartless, the IRS does not treat all tax debt the same for the purpose of travel restrictions. Some types of tax debt that will not be reported to the State Department include:
- Foreign Bank and Financial Account (FBAR) penalties
- Child support debt
- Debt which is in the process of being paid off, such as cases involving offers in compromise
In addition, those who are going through the bankruptcy process, are the victims of identity theft, and others in extraordinary situations will not have their tax debt reported to the State Department.
Reaching a resolution
The IRS wants your tax dollars. If you pay the tax debt the IRS says you owe, the IRS will remove you from the State Department’s list within 30 days. You may be able to expedite this process if you have urgent travel plans. You may also request expedited service if you are abroad and need a U.S. passport as soon as possible. Remember that you must also allow time for the State Department to process your application.
Paying off your tax debt in one payment may not be an option. If so, you may be able to address your tax issues by reaching a repayment agreement with the IRS. With the current lull in global travel, there is no better time to get ahead of this issue before it causes you serious problems. A skilled tax law professional can help you explore your options for addressing back taxes.