Travelers beware: the federal government has the authority to revoke your passport if you neglect to pay a substantial tax debt. This enforcement measure has become increasingly common in recent years, according to experts in the field.
Understanding the Law
Federal law mandates that the Internal Revenue Service (IRS) and the Treasury Department inform the State Department when an American taxpayer has a “seriously delinquent tax debt.” This refers to a significant federal debt that exceeds $62,000, as of 2024, and has been repeatedly disregarded by the taxpayer. The debt threshold encompasses the total aggregate federal tax liabilities, along with associated penalties and interest, imposed on an individual. This threshold is adjusted annually for inflation.
The State Department typically refrains from issuing a new passport and may either revoke or limit an existing one in cases of serious delinquency, as stipulated by the IRS. This enforcement mechanism, which has been in effect since 2018, is utilized as a final resort to recover unpaid tax levies, as explained by experts in the field.
Consequences of Passport Revocation
Failure to address the outstanding tax debt can have significant consequences for travelers. Individuals may be prohibited from traveling overseas until the debt is settled. This restriction can impact expatriates and those who frequently travel abroad for business, potentially necessitating their return to the United States until the tax issue is resolved, experts pointed out.
Passport revocation serves as a powerful tool to compel individuals to address their tax obligations. According to Troy Lewis, a certified public accountant and tax professor at Brigham Young University, revoking a passport is an effective method to garner the attention of affluent individuals who may have been neglecting their tax liabilities. He humorously remarked, “How do you get rich folks’ attention regarding paying their taxes? Just make sure they can’t summer in Europe.”
Increased Enforcement
The demand for international travel has surged in the wake of the Covid-19 pandemic’s decline. In fiscal year 2023, Americans submitted approximately 21.6 million passport applications, marking a record high, according to the State Department. Todd Whalen, a certified public accountant based in Denver, noted a rise in tax enforcement initiatives involving passports over the past few years.
Whalen, the founder of Advanced Tax Solutions, emphasized the growing significance of this enforcement measure. He shared that his firm has encountered several cases where clients learned about their revoked passports while attempting to travel abroad. Whalen highlighted the effectiveness of this collection strategy, noting that it prompts individuals to contact the IRS and address their tax debts.
Legal Basis for Passport Revocation
Virginia La Torre Jeker, an attorney specializing in U.S. international tax law, highlighted the ease with which overdue tax debts can surpass the $62,000 threshold. She pointed out that Americans residing abroad may incur substantial penalties for failing to file various foreign information returns. Additionally, tax debts can encompass business taxes for which the individual is personally liable, as well as trust fund recovery penalties related to withheld income and employment taxes.
It is essential to recognize that revoking a passport is not the initial method employed by the government to collect overdue tax debts. According to Lewis, the IRS must have exhausted all other standard collection activities before resorting to passport revocation. This typically involves the taxpayer failing to respond to previous IRS notifications, such as a federal tax lien.
Various court rulings have affirmed the federal government’s constitutional authority to revoke passports for tax debt collection purposes. Lewis cited cases such as Franklin v. United States and Maehr v. United States Department of State, where passport revocation was upheld as a legitimate measure to enforce tax compliance.
Remedies for Taxpayers
When the IRS certifies a debt as seriously delinquent and notifies the State Department, the taxpayer receives a notice (CP508C) outlining the potential implications of this classification. If the individual applies for a passport thereafter, the State Department is likely to deny and close the application unless efforts are made to address the outstanding tax debt. These efforts may involve paying the balance in full, entering into a payment plan, or negotiating a compromise agreement with the IRS.
Despite having a passport revoked, individuals can still use an active passport unless explicitly informed in writing by the State Department that it has been revoked or limited. La Torre Jeker emphasized that the IRS considers various factors, including past noncompliance and failure to cooperate, when deciding to revoke a passport.
The State Department has the authority to restrict a passport’s use solely for return travel to the U.S., preventing individuals from being stranded abroad without a means to return. The IRS sends taxpayers Letter 6152 before revocation, urging them to contact the IRS within 30 days to resolve their account and prevent passport cancellation.
Whalen noted that passport denial often catches debtors off guard, especially when they are traveling. Incorrect addresses on file or failure to receive notices due to relocation can contribute to this surprise. Many individuals only become aware of their outstanding tax debts when attempting to travel and encountering passport issues at the airport.
