The Fixing America’s Surface Transportation (FAST) Act was signed into law in 2015. In 2018, a provision of the law went into effect requiring the Internal Revenue Service (IRS) to notify the U.S. Department of State of taxpayers who owe a seriously delinquent tax debt. Taxpayers might not realize that one of the potential consequences of delinquent taxes is IRS passport revocation. However, when the Department of State receives such notification, it may deny an application for a passport or a passport renewal and may even revoke an otherwise valid passport.
Important Information about the Consequences of Delinquent Taxes
It is important for taxpayers to be aware of the tax-related provisions of the FAST Act and the levels of debt that can result in IRS passport revocation. A seriously delinquent tax debt is defined as follows:
- A federal tax liability of $50,000 or more, including fees and penalties;
- For which a notice of federal tax lien has been filed; and
- The taxpayer’s right to a hearing has been exhausted or lapsed.
The liability amount of the unpaid debt will be adjusted for inflation each year.
While it may seem nearly impossible to owe so much money to the IRS, it happens more often than you might think. The liability amount includes money owed from all previous years, so someone who is even just a few years behind on their taxes might already be cutting it close.
Tax Penalties and Interest Can Accrue Quickly
The penalties and interest that accumulate on unpaid tax debts add up quickly. For example, if you own foreign bank accounts, brokerage accounts, mutual funds, or trusts that exceed certain thresholds, you are probably required to file a Report of Foreign Bank and Financial Accounts (FBAR) with your taxes.
A non-willful failure to file an FBAR for a single one of these accounts can result in a civil penalty of $10,000. A willful failure to file an FBAR can result in a civil penalty of $100,000. There are dozens, if not hundreds, of other penalties, fines, and fees which the IRS can assess for an improperly filed tax return.
Consequences of Delinquent Taxes and Solutions for Delinquent Taxpayers
Thankfully, this rule is not quite as draconian as it might first appear, and there are solutions for delinquent taxpayers to avoid IRS passport revocation. Delinquent taxpayers at risk of losing passports should consider all options carefully.
Short of paying the full amount owed, taxpayers who enter into an IRS-approved installment agreement, an offer in compromise accepted by the IRS, or a settlement agreement with the U.S. Department of Justice are not considered seriously delinquent as long as they keep up with their payment obligations. For individuals who must travel abroad for business, making these payments on time could mean the difference between keeping and losing a job.
Solutions for delinquent taxpayers are available and can prevent IRS passport revocation. Seeking knowledgeable legal representation is the first step to understanding the tax-related provisions of the FAST Act and the potential consequences of delinquent taxes. The lawyers at Camden & Meridew, P.C. are experienced in helping clients work with the IRS to make tax debt more manageable. To speak with Corey Meridew or any of our tax attorneys, call 317-770-0000 or complete our online contact form today.
This website supplies general information about the law but it is provided for informational purposes only. This content does not create an attorney-client relationship and more importantly is not meant to constitute legal advice. You should not act on any of the information contained herein without first consulting an attorney.