The Internal Revenue Service was recently granted a tax collection power that may surprise readers: passport restrictions.
Specifically, a 2015 federal law called the Fixing America’s Surface Transportation Act, granted the IRS with certain collection powers for collecting tax debts of taxpayers who owe over $50,000, and against whom a tax lien or levy has been filed.
Codified in Section 7345 of the Internal Revenue Code, the provision allows the IRS to inform the U.S. State Department about individuals in this situation. The State Department then has the discretion to deny or limit the taxpayer’s passport until he or she has paid off the “seriously delinquent tax debt.”
Although the law passed in 2015, the IRS only recently worked out the implementation details. The program is now scheduled to start in March. The taxpayers who may be most affected are those with international travel plans and tax debts over the $50,000 threshold. However, the law also applies to individuals who may be renewing or applying for a passport.
Keep in mind that the $50,000 sum includes not only unpaid taxes, but also penalties and interest, which can quickly add up. Fortunately, there are also some exceptions. Entering into an installment agreement with the IRS is one way to avoid the passport restriction. In 2015, nearly 3 million taxpayers utilized this type of administrative settlement. Taxpayers who qualify for innocent spouse relief may also be exempted.
Our Connecticut law firm understands that dealing with tax collection efforts from the IRS can be stressful. Passport restrictions are just the latest tactic. Fortunately, we have the experience to represent taxpayers in dealing with the IRS. We will work hard to negotiate the best outcome for our clients. If the matter must proceed to a civil case, we also have the experience to prepare a strong legal strategy.
Source: Accounting Today, “Voices Ten things you need to know about passport restrictions on delinquent taxpayers,” Jim Buttonow, Jan. 31, 2017