It’s February and you’re thinking about that dream vacation to an island in the sun, or an exciting discovery of another country’s history and culture. That’s great, but before you book that ticket and renew your passport, make sure that you are up to date on your taxes.
The FAST Act, passed by Congress in December of 2015 contains a provision to increase the ability of the IRS to collect on overdue taxes. It requires the IRS to inform the State Department of taxpayers with seriously delinquent tax debt, to whom the State Department is then required to deny the issuance of a passport, or may revoke or limit an existing passport. The Act creates a new section of the Internal Revenue Code – Section 7345.
The requirements of this new section became effective as soon as the bill became law, but the IRS has delayed implementation until this March. Taxpayers therefore have a chance to correct delinquency situations before they are adversely affected by the certifications.
For most of us, the provisions will never come into play, because seriously delinquent tax debt is defined in the Code Section as debt that has been assessed and is over $50,000 on which a notice of lien has been filed, or a levy has been made. That $50,000 includes penalties and interest, which can mount up fast. There are some exceptions as well. If there is a payment plan in place, or innocent spouse relief has been sought, then that debt is not considered to be seriously delinquent.
The IRS is required to notify the State Department once a debt has been fully paid or an installment agreement or offer in compromise has been entered into, or if the debt is determined to be erroneous. The main issue with removing the certification is timing, if you will be in need of your passport soon. The best course of action is to at least have a payment plan in place so that you are in good standing with the IRS.
The taxpayers who are most likely to fall afoul of the new law are those living overseas. They are more likely to have had notices get lost in the mail or to arrive very late. Some may not even realize there was a filing requirement until the time comes to renew their passports. The State Department does have discretion in cases of Emergency or Hardship to not revoke a passport or to limit it to return travel to the United States only.
So before you book your tickets and ask for the time off work, make sure that you are in good standing with the IRS. You’ll be glad you did.