Passport revocation due to unpaid tax debts has become an increasingly common enforcement mechanism utilized by the federal government in recent years. The IRS and Treasury Department are required by federal law to inform the State Department if a taxpayer has a “seriously delinquent tax debt,” defined as owing more than $62,000 in federal taxes that have been repeatedly ignored. This threshold includes the total federal tax liabilities, penalties, and interest accumulated by an individual, and it is adjusted annually for inflation. The consequences of such serious delinquency can be severe, with the State Department potentially refusing to issue a new passport or revoking or limiting an existing one. This enforcement mechanism, implemented since 2018, is typically used as a final effort to collect unpaid tax levies.
The repercussions of having a passport revoked for tax debts extend beyond mere inconvenience. Travelers may find themselves unable to take trips overseas until they have resolved their debt, potentially affecting expats and business travelers who depend on frequent international travel. The restriction could force individuals to return to U.S. soil indefinitely until their tax issues are resolved. This punitive measure is considered a last resort by experts like Troy Lewis, a certified public accountant and tax professor at Brigham Young University, who emphasized the impact on affluent individuals by stating, “How do you get rich folks’ attention regarding paying their taxes? Just make sure they can’t summer in Europe.”
The demand for travel abroad has surged in the aftermath of the Covid-19 pandemic, leading to a record number of passport applications in fiscal 2023. Todd Whalen, a Denver-based CPA, noted the escalating enforcement efforts involving passports in the past few years. He emphasized the effectiveness of this collection strategy, recounting a case where a client only discovered their revoked passport while attempting to fly to Mexico for a special occasion. Such incidents highlight the tangible impact of these enforcement actions in compelling taxpayers to address their outstanding tax debts.
Virginia La Torre Jeker, an attorney specializing in U.S. international tax law, noted that it is relatively easy for overdue tax debts to exceed the $62,000 threshold. Americans residing abroad may face substantial penalties for failing to file various foreign information returns, in addition to any outstanding tax levies they owe. These levies can encompass business taxes for which the individual is personally liable or trust fund recovery penalties related to withheld income and employment taxes. Despite the severity of passport revocation, experts point out that it is not the government’s initial method for collecting overdue tax debts.
The federal government’s authority to revoke passports in order to collect tax debts has been upheld by various court decisions, as cited by Lewis. Cases like Franklin v. United States and Maehr v. United States Department of State have affirmed the constitutionality of this enforcement action. When the IRS certifies a debt as seriously delinquent, the State Department informs the taxpayer via notice CP508C, outlining the potential consequences. Individuals can still use their active passport unless notified in writing that it has been revoked or limited. Despite the government’s ability to restrict passport use to return travel to the U.S., debtors may find themselves unexpectedly denied at airports due to incorrect addresses or missed notifications.
The process of passport revocation for tax debts involves multiple steps, including sending Letter 6152 to taxpayers before any enforcement action. The IRS considers various factors, such as past noncompliance and failure to cooperate, before deciding to revoke a passport. However, instances of incorrect addresses or missed notifications can lead to debtors being caught off guard at airports. Whalen highlighted the potential for surprise denials due to outdated information, emphasizing the need for taxpayers to stay informed and proactive in addressing their outstanding tax liabilities.
The consequences of ignoring tax bills can have far-reaching implications for travelers and individuals with international business interests. Passport revocation serves as a potent tool in the government’s efforts to collect unpaid tax debts, with significant impacts on individuals’ mobility and travel opportunities. Taxpayers are advised to stay vigilant about their tax obligations and address any outstanding debts promptly to avoid the potential consequences of passport revocation.