The IRS has recently issued a statement reminding Americans that you could have your passport revoked if you have a delinquent tax bill of $52,000 or more. If you are applying for a passport then this process could be stopped too.
Under a 2015 tax regulation if someone owes more than $52,000 including interest and penalties and a levy has been put on their income yet still has not dealt with their late taxes, the IRS can contact the US State Department. The State Department can then make the passport expire immediately, or if you are applying for a new one, stop the new one from being issued.
If you are abroad when this process occurs you will be issued a travel document by the local US Embassy for direct travel to the United States. You cannot travel to a third country unless this is the most direct route back home.
You will know you are in trouble with the IRS when the passport revocation process begins. The IRS can only contact the State Department when they have either issued a wage garnishment or federal tax lien and, according to the IRS, “all administrative remedies under IRC § 6320 have lapsed or been exhausted.” To get to that point you will have received letters firstly warning you of your tax debt and then 30 days notice of the punitive action to be instituted by the IRS. You may have monies being taken from your pay check through your employer. By this stage you really should have sought tax debt advice from somewhere like Defense Tax!
There are exemptions to the process. If you are bankrupt they cannot start the process, and if you are in a federally-declared disaster area they cannot apply to stop your passport. If you are a victim of identity theft and the IRS knows about it then they cannot ask the State Department for the process to begin. Finally, as we will show later in this blog if you are in contact with the IRS over your tax debt then the process can either be stopped or prevented.
You will be notified by the State Department that the process is to begin and you will be given 90 days grace to contact the IRS to resolve the issue, challenge the certification in court, or pay the tax debt in full. If you do none of these the State Department can stop your passport.
If you owe the IRS $52,000 it will really pay to speak to us at Defense Tax to get advice as to how to stop the process altogether!
As we suggest above your first port of call should be getting a tax debt advisor and then enter into one of the processes above. It is far cheaper for the IRS to negotiate with tax debtors than it is to punish them in some way. Let’s now look at them in a little detail.
You and the IRS will come to an agreement as to a regular repayment plan. For a debt of this size you will have to produce a financial statement showing your income and outgoings, but you may well be allowed up to 72 months to repay your tax debt to them when they are satisfied you are capable of repaying the tax debt. This may incur some hardship while you repay your tax debt but the levy on your income and other punitive IRS measures will be removed.
If you can prove that your income has changed for the worse, and this will not change in the short to medium term, and most importantly there is no feasible means of repaying the tax debt without causing undue hardship the IRS may agree to an Offer in Compromise. We at Defense Tax have a great record of reducing tax bills by 90% or more through negotiating IRS Offers in Compromise.
In many cases the Offer in Compromise can result in a version of the instalment plan above but in some cases they can accept a one-off payment – perhaps from the sale of property for example.
Someone living on the streets is in no position to repay the IRS anything! No matter how tough you think they can be, their interest is in getting their money back, not kicking you when you are down. Though the IRS will often accept a suspension of tax repayments, proving financial hardship is a temporary measure and something you can use to get breathing space while you get on your feet again. You may use this as a stepping stone to applying for an Offer in Compromise as above.
You will be in the situation where the taxman is chasing you around the world and stopping your passport only if you have been trying to hide from your tax debt rather than facing up to it. None of the punitive measures above will happen if you have been negotiating with the IRS in the first place.
While for smaller tax debts you might be able to tackle the IRS yourself, with a $52,000+ tax bill it will really help to get an expert in such as our team at Defense Tax. Give us a call today at (+01) 866-657-1040 to get a free assessment of your situation where we can discuss ways of preventing the IRS from having your passport taken away.