Topic: Income Tax
Congress recently passed a five year, $300 billion dollar transportation bill known as the Fixing America’s Surface Transportation Act (FAST Act). The primary goal of the bill is to allocate Federal money to update American infrastructure, but tucked deep within the bill is a key tax provision that could have serious ramifications for those who owe money to the IRS. In addition to having to deal with the interest, the penalties, tax liens, levies and other headaches, a serious Federal tax delinquency may now cost you your U.S. passport. Loss of your U.S. passport will mean that you cannot travel outside the United States. For taxpayers living in certain states that have not complied with the Real ID Act, the loss of your U.S. passport might also make it difficult to travel on airplanes in the United States and to enter certain federal buildings and facilities.
If you have any questions about this new law, please contact the Law Offices of A. Lavar Taylor LLP.
What is Seriously Delinquent Tax Debt?
The FAST Act requires that the IRS send to the State Department the names of all taxpayers with seriously delinquent tax debt so that the State Department can revoke their U.S. passport. According to the law, seriously delinquent tax debt has two criteria:
A levy or tax lien has been issued by the IRS; and
The amount owed (including any interest or fees) is greater than $50,000.
An IRS levy is a seizure of assets to satisfy tax debt. This could be in the form of a wage garnishment, a seizure of assets already in hand such as money in a bank account, or the seizure and sale of a tangible assets such as a vehicle or real estate. A tax lien is a publicly filed document which alerts creditors that the government has a lien on the taxpayer’s property. If you have received a notice from the IRS indicating either a current or pending levy or lien, please contact an experienced tax professional immediately.
The bill includes four different explicit exceptions to the passport revocation rule:
The taxpayer has installment plan with the IRS and the payments are up to date;
The taxpayer has reached an offer in compromise settlement of tax debt with the IRS;
The taxpayer has a pending collection a due process hearing; or
The taxpayer has filed a pending application for innocent spouse relief.
There is also an exception that allows the State Department to issue passports for emergency humanitarian reasons. A potential example of an emergency could be when a parent or close relative is ill in another country. In that case it might be possible that a passport would be granted. But, that is just speculation at the current time. There is no way to know how broadly the State Department will use their authority to grant passports for emergency reasons. Further, experts are concerned that both the IRS and the State Department might be very slow when it comes to dealing with emergency exceptions.
The passport revocation provision became official United States law on January 1st, 2016. The law will become operational once the IRS issues regulations and establishes formal procedures for implementing this law. It is best that anyone with existing or potential tax liabilities speak to an experienced professional as soon as possible if they wish to learn what can be done to minimize the risks of losing their U.S. passport.
Your right to travel freely around the world is incredibly important. Federal tax debt now puts that right at risk. Beyond keeping your passport in good standing, delinquent taxes can create other major problems and will not go away on their own. The passport revocation provision of the FAST Act is more evidence that tax noncompliance is being treated increasingly harshly by the IRS. If you have tax issues, you need a dedicated and knowledge tax attorney to fight aggressively on your behalf. The attorneys at the Law Offices of A.Lavar Taylor can comprehensively review your case and help you chart a path forward towards financial freedom.
Law Offices of A. Lavar Taylor LLP
PHONE: 714- 546-0445