The Internal Revenue Service, probably the most-hated government agency in America, just became more powerful, and probably more ominous. As everyone knows, IRS is the only agency that can, without going to Court, seize your asses and empty your bank accounts – one of the reasons they earned the title of being the most feared agency. Now, the IRS has been empowered to seize American passports of delinquent taxpayers, maybe even preventing those taxpayers from domestic flights.
Congress recently passed a law that, beginning January 2016, if you owe the IRS more than $50,000 (including interests and penalties), IRS could revoke your passport. Under a new Section 7345 of the Internal Revenue Code, once the IRS certifies your tax delinquency, the State Department may revoke, deny or limit your passport. As an aside, though equally important, the new law also authorized IRS to engage private collection agents to go after those who owe the IRS money.
Slipped into a massive, 1,300-page highway authorization bill recently passed by Congress, with little debate, the government gave the IRS yet an additional power to collect more outstanding taxes from delinquent taxpayers. The government may refuse to issue a new passport, renew an expiring one or even revoke a current passport. Yes, you could conceivably be on a vacation trip to Moscow and have your passport revoked while away from home. This would render you constructively stateless as you would not have requisite documentation to reenter the country. Horrible possible scenarios abound
Taxpayers may be subject to this law though only after the IRS has already certified the indebtedness, by filing a lien against the taxpayer. However, if the debt is being administratively contested within the IRS, within Appeals, under an installment agreement or pending in Tax Court, the new law may not apply to you.
While citizens who owe child support have long been subject to passport denial or revocation, this new measure may come as a shock to many Americans. For starters, it is not difficult for tax liability to add up to $50,000 once you take interests and penalties into account. Also, IRS routinely make mistakes and many taxpayers find out about their tax debts only after a tax lien as filed against them. With the new law, some taxpayers may find out about outstanding tax debts only when they apply for passports.
An unintended result of this new law may await some citizens fairly soon, causing unwelcome headaches. Starting in 2016, citizens of certain states where the state governments have not met the federal standard under the Real ID Act may no longer use the states’ driver’s license as identification for domestic flights. These citizens may instead have to use their US passports for identification at the airports. Thus, if the US government has revoked or denied passports to such citizens, they would be unable to fly, even domestically.
Furthermore, American citizens who live abroad are especially vulnerable to this new law. By some estimates, some 7 million American live abroad. For these US citizens, the passport is their lifeblood – used in opening bank accounts, registering in a hotel, enrolling children in schools, obtaining local driver’s licenses, etc. If the passport is suddenly yanked, (mistakes happen and IRS mail sometimes does not get to Americans living abroad) American citizens may find themselves without a valid passport, constructively stateless in foreign land and unable to return to the US to even answer claims against them in US courts. And, given the draconian penalty regimen of FATCA it is not at all difficult to suddenly have a tax debt above the $50,000 threshold.,
Though the new law allows for the State Department to issue emergency passports for “humanitarian reasons” there has been no comments from the Department on the new law. Moral to this new law? If you owe the IRS, you should engage and remain diligent to resolve the debt. If you owe the IRS or have unfiled tax return that may have you owing the IRS, do not delay further – contact the tax attorneys and CPAs at Thorgood Law Firm www.thorgoodlaw.com Call 212-490-0704 for FREE consultation.
