The New Year has come with some new resolutions, including taking some time off for yourself to travel to some new places and experience some new things. Not so fast! If you have major tax debt, you need to be aware of a new law which may put a stop on traveling around the world.
The Fixing America’s Surface Transportation Act, or “Fast Act” became a law in late 2015, the purpose of the law is to provide a long-term funding for transportation projects including the construction of new highways. What this means for you: the Act also included a new provision which allows the State Department to remove access of passports from delinquent taxpayers.
The Internal Revenue Service (IRS) can not directly control your passport, but the State Department can! Since tax debts are assessed by the IRS, the State Department doesn’t have access to taxpayer information because of privacy laws in act. To connect these two departments together, the law now requires the IRS to advise the state about seriously delinquent taxpayers. This in turn affects you, as the State Department may refuse to renew or issue a passport to those with serious back taxes. The Secretary of State also has permission to yank any passport issued to those with tax debt.
An exception to the law is if you are under an installment agreement or an Offer in Compromise to pay off the tax debt in a timely manner. If your collection is Due Process hearing with a levy or if you have filed for innocent spouse relief, you are excluded from this law as well.
If you are seriously delinquent, you will receive or should have received an IRS letter notifying you (in writing) that the debt is also certified to the State Department. The State Department may hold your passport renewal or application for 90 days, allowing you to resolve the payment or enter a payment plan. To get off the list, you must show that you have paid the debt in full or dip below the $50,000 seriously delinquent mark.
So maybe you’ll decide to just skip out on the trip to Italy next summer, but even traveling to different states is affected! Under the law, the REAL ID Act, federal agencies cannot accept driver’s licenses or other forms of identification that are not passports. As of January 22, 2018, all travelers with a driver’s license or state ID card that does not meet the standard must provide a passport. In just a few years the rules will be even stricter on the issue, as of October 2020, every air traveler will need another form of identification such as a passport for domestic air travel.
Not paying your taxes can have serious repercussions in the next few years with traveling and can bind you permanently to the state you are in. If you have a current tax debt and cannot make full payment at once, seek a tax debt expert and consider other options before revoking your right to travel.