More travel complications are in store and it’s not just for foreigners. Under new rules to be implemented soon, American citizens can be banned from travelling by having their passports revoked for unpaid tax debt.
Certification of Individuals with Seriously Delinquent Tax Debt
A new law passed by Congress in 2015 authorizes the IRS to certify to the State Department if a taxpayer has seriously delinquent tax debt. IRC § 7345. According to the IRS website, the IRS has not yet started certifying tax debt to the State Department but it is expected to begin in early 2017.
What is Seriously Delinquent Tax Debt?
Under the new law, seriously delinquent tax debt is an individual tax debt totaling more than $50,000 (including penalties and interest) for which a (1) Notice of Federal Tax Lien has been filed or (2) Levy has been issued.
Revoking of Passport
Upon receiving certification, the State Department may revoke your passport. There is no grace period prior to the revocation.
If you’re currently applying for a passport, the State Department will hold your application for 90 days to allow you to enter into a payment agreement or apply for one or more forms of tax debt relief.
If Your Passport is Revoked or Denied
You can file suit in the US Tax Court or a US District court to have the court determine whether the certification is erroneous.
If the certification is valid, you should immediately pay the debt, enter into a payment arrangement, or make an alternative arrangement such as an offer in compromise to keep your passport. The IRS will reverse the certification within 30 days of resolution of the issue.
If you are Planning on Leaving the Country and Owe Significant Tax Debt
If you are a US citizen, you are free to travel until the State Department has received a certification from the IRS. If the certification is received while you are abroad, the Secretary of State may limit your passport to allow you to return to the US.
If you are not a US citizen, do not travel abroad if you owe significant tax debt! You should inform your immigration attorney of your travel plans and retain a tax attorney to resolve the back tax issues prior to your travel.