U.S. Expats owing more than $50,000 in taxes may soon find themselves without a passport.
On December 4, 2015 U.S. law officials snuck in legislation allowing U.S. expats and travelers to lose their passport privileges for having overdue taxes.
The law came as an amended section to the new Fixing America’s Surface Transportation Act (FAST). According the the U.S. House of Representatives:
[quote_box_center]The Fixing America’s Surface Transportation (FAST) Act is five-year legislation to improve the Nation’s surface transportation infrastructure, including our roads, bridges, transit systems, and rail transportation network.[/quote_box_center]
Section 7345 of the Act covers the “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.”
Are You At Risk?
In 2014, the IRS reported 12.4 million delinquent tax accounts in the U.S., resulting in $131 billion unpaid taxes and fees. According to Mark Luscombe, principal federal tax analyst at Wolters Kluwer, many of these are owned by U.S. citizens living in other nations — currently there are over 7 million U.S. citizens living abroad.
Chief executive officer at ProVision Wealth Strategist and certified public accountant Tom Wheelwright explains that most who are in “deep trouble” with the IRS are often given up to four notices over three to six months before collection agencies are contacted. Upon reaching that stage, however, passports will be endangered.
[quote_center]”You could be on your honeymoon and they could revoke your passport.”[/quote_center]
Once revoked, U.S. citizens who are currently abroad will only be allowed to travel back to the U.S. before paying their dues.
The good news is, according to RT America, the FAST Act’s passport revocation section will not apply to U.S. taxpayers who have “struck a deal” with the IRS — for example, to pay in installments. People who seek hearings may also evade the revocation.
In addition to revoking passports, the FAST Act will also permit private debt collectors to go after taxpayers “forcing [them] to make good on their debt.” In fact, the IRS must turn over certain unpaid tax delinquencies private collectors.
Ultimately, the Joint Committee on Taxation claims the new law is expected to raise $398 million over 10 years.