Passports and the IRS

Not only is the IRS going to manage your healthcare, they are going to decide whether or not you get a passport.

Tacked into a  highway bill that has recently passed the U.S. Senate has a provision that would allow the State Department to deny passports to US taxpayers who owe delinquent tax debts to the IRS.

If you owe more than $50,000 to the IRS, and if this Bill is signed into law by the president, you could be denied your right to leave the United States.  

Who can be denied a passport for delinquent IRS tax debts?

The Bill, if signed into law, would have dire consequences for those with big unpaid and unresolved tax bills. The law would apply to those who (1) owe more than $50,000 to the IRS, and in addition, have been issued a (2) notice of federal tax lien, or a final notice of intent to levy. Those with smaller tax debts, and those tax debt proposed by an IRS audit and not finalized are not affected.

Does this mean if you owe money to the IRS, you can’t get a passport? Or your passport will be revoked?

No. First of all this bill is not law yet. Second, even if it become law, the bill clearly states that if you are in a repayment plan, or installment agreement with the IRS, your passport will not be denied.  The same is true even if you settle your back taxes with an Offer in Compromise, you can still get a passport.

If your case is still pending with IRS appeals with a Collection Due Process hearing, and there is no final determination letter, you can still get your Passport renewed.

Also there are exceptions for those attempting to return to the US and those who wish to leave the US for family emergencies. It is unclear who will be in charge of who will be determining what a family emergency is.

But what about those in Currently Non-Collectible status?

There it is a little tricky. Currently Non-Collectible status is when the IRS agrees the taxpayer is in a hardship and agrees not demand any money, aside from holding on to tax refunds (there is an additional requirement is that a taxpayer not run up any new tax debts).  But believe it or not, there is actually no statute that authorizes Currently Non-Collectible or “hardship” status.

Known as Code 530 to IRS insiders, “CNC status” is authorized by IRS policy statement 5-71 as referenced in the Internal Revenue Manual 5.16.1.1. This bill makes no reference to those in CNC.

Probably not lose your passport for FBAR penalties?

FBAR penalties are penalties the IRS imposing for failure to properly report foreign bank accounts. So can you lose you passport for unpaid FBAR penalties? Probably not.

First, the bill is written rather vaguely. It says a “tax.” Well, FBAR penalties aren’t really a tax and this is why it makes a difference. The basis for the imposition of taxes comes from Title 26 of the US tax code. The basis for the implementation of FBAR penalties comes from Title 31, and in particular the Bank Secrecy Act.  This bill seeks to amend would amend Title 26, and not Title 31. So liabilities from Title 31 would, arguable, be exempt.

Further supporting the argument that this would not apply to outstanding FBAR penalties is the fact that the administrative remedies available to past due tax obligations are not available to FBAR penalty assessments.

 Anton Ewing