Recent years have seen an increase in enforcement efforts by the federal government when it comes to seriously delinquent tax debts. The IRS and Treasury Department are required by federal law to notify the State Department when an individual has a tax debt exceeding $62,000 in 2024, which includes federal tax liabilities, penalties, and interest. This threshold is adjusted annually for inflation.
If a taxpayer ignores this seriously delinquent tax debt, the State Department may refuse to issue a new passport, or revoke or limit an existing one. This enforcement mechanism, in place since 2018, serves as a last resort to collect unpaid tax levies. The consequences of such actions can be significant, as travelers may be unable to take trips overseas until they resolve their debt. This can have a major impact on expats and those who travel internationally for business, potentially forcing them to return to the U.S. until their tax case is resolved.
Troy Lewis, a certified public accountant and tax professor at Brigham Young University, describes revoking a passport as a “step of last resort.” He emphasizes the effectiveness of this measure in getting the attention of individuals, particularly those with high tax debts. Lewis suggests that preventing wealthy individuals from traveling to luxury destinations like Europe may be a powerful motivator for them to settle their tax obligations.
Increased demand for passports
The COVID-19 pandemic has led to a surge in demand for U.S. passports, with a record number of 21.6 million passport applications in fiscal 2023. This increased travel activity highlights the importance of addressing tax debts promptly to avoid any disruptions in international travel plans.
CPAs like Todd Whalen have witnessed a rise in tax enforcement efforts related to passports in recent years. Whalen’s firm, Advanced Tax Solutions, regularly assists individuals and businesses in resolving tax debts, some of which involve passport implications. He notes that individuals may only become aware of their revoked passport when attempting to travel internationally, underscoring the effectiveness of this enforcement measure in prompting taxpayers to address their debts.
While the revocation of a passport is a significant consequence for individuals with seriously delinquent tax debts, it is generally a measure considered after other collection activities have been exhausted by the IRS. Courts have upheld the government’s authority to revoke passports for tax debts as constitutional, citing specific cases where such actions were justified based on the taxpayer’s lack of compliance.
When the IRS certifies a tax debt as seriously delinquent, the State Department notifies the taxpayer through a CP508C notice outlining the implications of this classification. Individuals have the opportunity to address their debts by paying in full, setting up a payment plan, or reaching a compromise agreement with the IRS. Failure to resolve the debt may result in a denial or revocation of the individual’s passport when applying for one.
In some cases, individuals are caught off guard by passport denials when they travel, often due to outdated contact information on file with the IRS. This lack of awareness can lead to last-minute disruptions for travelers who are unaware of their tax debts until they are at the airport, facing passport restrictions that prevent them from boarding their flights.
Ignoring a tax bill can have serious consequences, potentially affecting your ability to travel internationally and requiring you to address your debts promptly to avoid disruptions in your plans. Understanding the enforcement mechanisms and legal implications of seriously delinquent tax debts is crucial to maintaining financial compliance and avoiding passport issues in the future. Take proactive steps to resolve any outstanding tax liabilities to safeguard your ability to travel freely and without restrictions.
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