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Travelers beware: If you ignore a hefty tax bill, the federal government could revoke your passport.
Experts say such punishments have become more frequent in recent years.
federal law need The IRS and Treasury Department will notify the State Department if Americans are “significantly delinquent” on their taxes.
That’s a massive federal debt — set to exceed $62,000 by 2024 — that taxpayers repeatedly ignore.
The debt threshold includes the total federal tax liability, plus penalties and interest levied on individuals. It is adjusted annually for inflation.
State Council General Will not be sent According to the IRS, existing passports may be revoked or restricted if there are serious violations.
Governments often use this enforcement mechanism already in place Since 2018 – Experts say this is a last-ditch effort to collect unpaid taxes.
If these debts remain unpaid, the potential consequences are huge: travelers may be unable to travel abroad until their debts are resolved. For example, experts say expats and business travelers abroad may have to return to U.S. soil indefinitely until their tax cases are resolved.
Troy Lewis, a CPA in Draper, Utah, and a professor of accounting and taxation at Brigham Young University, said revoking a passport is a “last resort.”
“How do you get the rich to focus on paying taxes? Just make sure they can’t summer in Europe,” he said.
‘It gets people to call the IRS’
The demand for overseas travel has That number has surged as the Covid-19 pandemic has abated. American Applied According to the U.S. State Department, the number of U.S. passports in fiscal year 2023 was approximately 21.6 million, a record high.
Todd Whalen, a Denver-based CPA, has seen an increase in tax enforcement involving passports over the past three years.
“This is becoming more and more important,” said Whalen, founder of Advanced Tax Solutions, a company that helps consumers and businesses resolve tax debt. “We’ve had a few (cases) this year.”
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In one case, a client discovered his passport had been revoked at the airport as he prepared to fly to Mexico to celebrate his son’s high school graduation.
“It works,” Whalen said of the collection effort. “It gets people to call the (IRS).”
A State Department spokesman declined to provide annual statistics on how many taxpayers have had their passports revoked or denied. The IRS had not commented as of press time.
All other collections must have been “used up”
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Virginia La Torre Jeker, an attorney who specializes in U.S. international tax law, said overdue taxes can easily exceed the $62,000 threshold.
Debt can also include any taxes owed by an individual, she added. These could be sales taxes or trust fund recovery penalties that taxpayers are personally responsible for, she said. (The latter relates to income tax withholding and employment taxes, such as Social Security or Railroad Retirement Taxes.)
How to get rich people to pay attention to taxes? Just make sure they don’t spend the summer in Europe.
Troy Lewis
Professor of Accounting and Taxation, Brigham Young University
However, experts say revoking passports is usually not the first way governments use to collect on such overdue debts.
Lewis, owner of Lewis & Associates, CPA, said the IRS has definitely “exhausted” all other typical tax collection activities.
Generally, this means the taxpayer has not responded to a federal tax lien notice previously issued by the IRS. (Liens are government legal claims The debtor’s assets, such as real estate and other personal property. However, this was not a move to collect said property.
Lewis said various courts have upheld the federal government’s ability to revoke passports to collect taxes as constitutional.
He cited two recent cases as examples: Franklin v. United States In the United States Court of Appeals for the Fifth Circuit and Meier v. U.S. Department of State United States Court of Appeals for the Tenth Circuit.
In the former, defendant James Franklin owed approximately $422,000 in taxes for failing to file accurate tax returns and report a foreign trust of which he was the beneficial owner. The IRS eventually filed a tax lien and levied his Social Security benefits, and the State Department subsequently revoked his passport.
“This seems to be something (the government) can do,” Lewis said.
Travelers can take remedial measures
The State Department will not immediately revoke passports. When the IRS certifies that a debt is materially delinquent and issues a warning to the State Department, it will mail a notice to the taxpayer— CP508C – Outline the potential impacts of this classification.
If a person subsequently applies for a passport, the State Department will typically deny and close the application if the person does not make an effort to repay the debt. Such efforts may include paying the balance in full, establishing a payment plan, or establishing a payment plan compromise agreement With the IRS.
debtor still available If they have a valid passport, they will be required to do so unless notified in writing by the State Department that their passport has been revoked or restricted, the IRS said.
“The IRS considers a variety of factors when choosing to revoke a passport, including a taxpayer’s past violations and the taxpayer’s failure to cooperate with the IRS,” LaTorre Jackel said.
She said the State Department could limit the use of the passport to travel back to the United States, thereby preventing the person from “getting into trouble” abroad.
She added that the IRS sent taxpayers Letter 6152 before the revocation, requiring them to call the IRS within 30 days to resolve their account issues and avoid passport cancellation.
Still, passport denials sometimes surprise debtors when they travel, said Whalen of Advanced Tax Solutions.
For example, Whalen said, the IRS may record the wrong address — especially if the taxpayer has moved — and mail the notice to the wrong place.
“A lot of times, they don’t know they have a balance until… they show up at the airport,” he said.