Living with federal tax debt leads to stress, fear, and financial difficulty, but you can still enjoy a vacation abroad to get away from it all. However, if a new bill becomes a law, then you may have to put that vacation on hold. A proposal attached to a highway bill aims to allow the State Department to revoke or deny passports due to unpaid tax debts.
The IRS and Justice Department already cooperate to catch tax evaders who head abroad to escape the clutches of the IRS. The Foreign Account Tax Compliance Act (FATCA) also helps ensure Americans who live or work abroad remain compliance in their US taxes by forcing full disclosure about foreign assets, including foreign banks providing information about potential American account holders.
Much of this is to try to prevent people from hiding themselves and/or their assets abroad to get out of paying taxes. A new bill proposed in Congress will take these measures a step further by targeting taxpayers who have not tried to avoid paying their taxes but simply cannot afford to do so. The idea began back in 2012 when the Government Accountability Office saw potential in using passports as a way to collect unpaid taxes.
The H.R. 22 is a highway bill that passed through both the Senate and the House, meaning it is on its way to becoming a law. It includes an amendment that would implement the plan to deny passports to those with significantly high federal tax debt. Currently, it is in conference, which means something might be altered, but experts predict it passing as is. If and when it passes, it will implement section 7345 to the current tax code, which is entitled “Revocation or Denial of Passport in Case of Certain Tax Delinquencies” to start in January 2016
With this bill, the State Department has the right to deny, revoke, or limit a US citizen’s passport if they have $50,000 or more in tax debt. It is not just criminal tax cases or flight risks addressed by this bill. Anyone who has a significant tax debt could find themselves without their passport, even if they originally owed less but the penalties and interest raised their debt to this level.
Taxpayers who are included in this group may find their passports rescinded, or if they have yet to apply for one, they will not be able to do so. The State Department will have the right to deny passports, although there is still an administrative exception that allows the issuing of passports to citizens in the cases of humanitarian reasons or emergencies.
The Effect of the New Tax Code
The biggest effect in this new law could be in people’s interaction with the IRS. They already fear this large collection agency, and now they have something else that could be taken away from them beyond their belongings and assets. They lose the right to their passport, which is not just a paper that allows them to travel; it also is a document proving their identity and citizenship. The right to travel is also an internationally recognized right. This bodes the question of whether or not this bill is even constitutional.
It is not difficult to find yourself owing $50,000 or more, especially when you include interest and penalty fees. If you wait to allow the IRS to take collection action, you could find yourself without a passport, a basic right as a citizen. However, the law only applies to those who have an outstanding tax debt. If you are working on paying it off under an Installment Agreement, you can still get your passport as long as you are in compliance to the agreement.
Don’t risk getting your passport taken away from you if this law passes into a bill. Take action today to negotiate a settlement for your tax debt. Even if you do not yet owe $50,000, it is time to take action because if you owe any significant amount of tax debt, it can quickly reach the $50,000 mark with penalties and interest. Call Fidelity Tax Relief at 714-500-7369 to speak to expert tax relief specialists who will investigate your case and find the best resolution for you to prevent yourself from facing any type of collective action, including losing your right to travel. In some cases, you may even find you can significantly reduce your tax debt.