Owing taxes to Uncle Sam may cost your ability to travel overseas, provided you’ve taken no preventive measures to tackle the crisis.
In December 2015, Section 7345 was enforced and placed under the tax code. The Internal Revenue Service (IRS) can revoke your passport for failing to pay your taxes. However, your tax debt should be at least $50,000 or more, including all the interest and penalties, accrued in the last 10 years. Moreover, the IRS should have filed a notice of lien and a levy against you. That law came to be known as the Fixing America’s Surface Transportation Act or FAST Act.
The State Department enjoys the power to control passports and not the IRS. On the other hand, the IRS can assess tax debts and not the State Department.
To bridge the gap, the new law intervenes and empowers the IRS to inform about the highly indebted taxpayers with the State Department. In turn, the State Department may agree to decline issuing or renewing the passport of a tax debtor. Not just that, the Secretary of State can revoke a valid passport of a delinquent taxpayer.
Yes, there are. As per the new law, any tax debt that is being currently paid off through an installment agreement or an Offer In Compromise will not be counted. Moreover, the IRS waives off tax debts that are under the Collection Due Process hearing. It should have been asked for by the taxpayer within a certain deadline that is related to a levy or debt for which collections have been stalled on ground of innocent spouse claim.
The IRS needs to inform you in writing about certifying your tax debt to the State Department. Once the letter has been received, the State Department will keep your passport application or renewal on hold for 90 days. During this period, you can rectify errors in your tax files, pay off your tax debts in full, or sign a fresh tax repayment agreement with the IRS. You don’t have any grace period to resolve your tax debts, prior to your passport’s revocation by the State Department.
To resolve your tax debt crisis, you’ll have to pay off your debts in full. Or your tax debt must cease to be legally enforceable or is not seriously delinquent, as per the statute. Moreover, you must repay all tax debts, even if it's under the $50,000 threshold, or qualify any other criteria.
That’s not the end of it. In order to avoid tax penalties, you may postpone your overseas vacation plan for the time being.
What will be the consequences, if you decide to go to places like Boston or Nashville? Here’s the trickiest part. According to the REAL ID Act passed in 2005, federal agencies can’t accept a driver’s license and identification cards issued by a state that fail to qualify certain government-mandated parameters.
From January 22, 2018, every traveller having a driver’s license or identification card, provided by a state that doesn’t qualify per the stipulated standards must furnish an alternative type of identification that is validated by the Transportation Security Administration (TSA), unless there’s an extension by the said state. The list of valid identification proofs also includes a passport.
The law may become more stringent few years down the line. From October 1, 2020, all air travellers will have to carry a REAL ID-approved license, or other acceptable identity proofs like passport for domestic air travel.
How all these laws are related to your outstanding taxes? This is where the new tax law comes into effect. Non-repayment of taxes might adversely affect your ability to fly since non-compliance with the law can get your passport revoked. Based on your state of residence, the government can block your air travel, if your passport gets revoked.
If you owe tax debt and can't repay them in full, then you can opt for the legal ways to get IRS tax debt relief.