As President Trump's executive orders regarding immigration hold the world's attention, other new challenges for travelers are brewing. Specifically, these challenges may impact U.S. travelers who have seriously delinquent federal tax debts.
Last week, pursuant to 2015 legislation, the IRS announced that within 30 days it will begin advising the U.S. State Department of U.S. citizens with seriously delinquent tax debts. As a result of these notifications, the State Department is expected to take action within 90 days. Citizens who have federal tax debts in excess of $50,000, including interest and penalties, may have their U.S. passports revoked within the next few months.
Additionally, U.S. citizens residing or traveling overseas may be required to return to the United States until their tax debts are resolved.
If a citizen is certified by the IRS as having a seriously delinquent federal tax debt, the IRS must transmit the certification to the State Department for action as to the denial, revocation or limitation of that individual's passport. Accordingly, applicants who are included on the certifications are ineligible for a passport.
Citizens who have such tax debt can only avoid passport revocation if he/she enters into an installment agreement or an offer in compromise with the IRS or is granted innocent spouse relief or pays the debt in full. Additionally, taxpayers who have made a timely request for collection due process hearing (i.e., a hearing wherein the underlying tax liability may be contested) can also avoid revocation while the hearing is pending.
We will continue to monitor these activities closely to understand the nature, timing and extent of the State Department actions once the IRS notification process has commenced. If you feel you may be impacted by these notifications, and you have upcoming travel plans or are forced to return to the United States, we urge you to act promptly. There are a variety of options available to settle outstanding tax debt, often at quite favorable terms.
If you would like more information about this topic or your own unique situation, please contact any of the practitioners in the Tax Accounting Group. For information about other tax and accounting topics, please visit our publications page.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.