Will You Lose Your Passport If You Don’t Pay Taxes?

In Congress told the State Department to deny passports to, and revoke passports from, people with large federal tax debts. But I have yet to hear about anyone actually having their passport revoked or denied because of this.

Here’s an update on the policy, from the Taxpayer Advocate Service’s Annual Report to Congress, that explains why:

In , Congress passed the Fixing America’s Surface Transportation (FAST) Act, which requires the Department of State to deny an individual’s passport application and allows the Department of State to revoke or limit an individual’s passport if the IRS has certified the individual as having a seriously delinquent tax debt. Although the IRS does not plan to implement the passport certification program until , the proposed IRS procedures and policies raise concerns about how the program will harm taxpayers and infringe upon their rights. Currently, an estimated 270,000 taxpayers meet the criteria for a seriously delinquent tax debt and do not meet one of the statutory exceptions or discretionary exclusions to certification. The IRS expects to certify 2,700 taxpayers when it initially implements the program in , and continue with certifications throughout the year in phases based on taxpayer response rates. At this time, the IRS will not be sending recommendations or requests to the Department of State to revoke taxpayers’ passports; although, the Department of State will revoke passports in accordance with its longstanding procedures.

This suggests to me that if you have such a tax debt (defined as one in excess of $50,000 $51,000), you may want to file an expedited request to renew your passport as soon as possible. They may renew your passport before the IRS gets around to sending in your name, and may not get around to filing a revocation recommendation any time soon. If you wait, however, you may find it difficult to renew your passport when it expires.

The Taxpayer Advocate Service, by the way, is very critical of how the IRS is implementing the program. It concludes:

Taxpayers have a constitutional right to travel, and the IRS risks abridging this right by declining to adopt additional taxpayer protections, such as stand-alone pre-certification notices that provide taxpayers with the right to challenge the IRS’s position and be heard.

(That italicized phrase comes from the Taxpayer Bill of Rights which the IRS adopted as a sort of aspirational or public-relations document in lieu of adopting actual policies to protect taxpayer rights.)

The same report also gives us an update on the IRS’s Private Debt Collection Program.

The program, which has been operating requires the IRS to turn over to private debt collection agencies some of the delinquent tax accounts it has failed to pursue.

The numbers for are in:

  • The IRS received $6.7 million of payments from taxpayers whose debts were assigned to PCAs; and
  • The total cost of the PDC program was $20 million, three times the amount collected.