Delinquent taxpayers who owe $50,000 or more to the Internal Revenue Service (IRS) may have their passports revoked under a new law Congress passed and President Barack Obama signed on Dec. 4.
The new legislation is part of a law known as the Fixing America’s Surface Transportation Act. The section is called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”
In addition to stripping individuals owing at least $50,000 of an American passport, other provisions of the new law include that the IRS turn over certain unpaid tax delinquencies to private debt collectors.
There are some exceptions to the legislation, including taxpayers who have come to installment payment agreements with the IRS, minors with large unpaid tax amounts, certain military personnel and innocent spouses. Additionally, individuals seeking hearings would not have their passports revoked, according to The Arizona Republic.
Americans who happen to be out of the country when their passport is revoked will be allowed to return home.
“Inactive” tax delinquencies would be handed to private debt collectors if the IRS has attempted and failed to locate the taxpayer and collect unpaid taxes, or if the agency finds that a particular collection is “not worth their time,” said Tom Wheelwright, a certified public accountant and chief executive officer at ProVision Wealth Strategies, the Republic reported.
Further details are still in progress, the Republic reported. However, an agency spokesman said the IRS will implement the terms “as soon as feasible,” according to RT.
In 2014, the IRS reported more than 12 million delinquent accounts owing about $131 million in assessed taxes, interest and penalties. Many American citizens with severe delinquencies are those residing in other countries, Mark Luscombe, principal federal tax analyst at researcher Wolters Kluwer in Chicago, told the Republic.
Congressional analysts also expect that the new rule will raise approximately $400 million throughout the next decade, Luscombe told the Republic.
Some believe the $50,000 threshold set by the legislation is too low, including author Lief Simon, who wrote in Offshore Living Letter, a publication about living and investing overseas, that the $50,000 threshold is farther-reaching than what it might seem. He noted that penalties and interest count toward the amount.
“In our current age, it’s not that uncommon or difficult to find yourself owing the IRS fines of more than [$50,000], perhaps, for example, for not filing forms you didn’t know you needed to file. The minimum fine for not filing your FBAR [Foreign Bank and Financial Accounts report] is [$10,000]. However, if the IRS decides that you willfully failed to file your FBAR, the penalty jumps to [$100,000] or [50 percent] of the account values, whichever is greater,” Simon wrote.
Wheelwright shared a similar view. He told the Republic that incurring such a debt would not take much if a person lost a job or wound up with big medical bills. Furthermore, contacting the IRS is proving increasingly difficult, with the agency answering less than half of telephone calls from taxpayers.
