If you owe the IRS, should the tax agency be able to revoke or cancel your passport? Whether IRS power over passports is a good idea can be debated, but last year-end, Congress enacted H.R.22, quietly adding a new section 7345 to the tax code. Its title is unambiguous: “Revocation or Denial of Passport in Case of Certain Tax Delinquencies.” The law has nothing to do with offshore accounts. It isn’t limited to criminal tax cases, or even to situations in which the IRS thinks you are trying to flee your tax debt and leave the IRS or State Department holding the bag.
In fact, the idea of this law is to use your desire–or need–to travel as a way to enforce tax collections. If you owe the IRS and want to travel, you should pay up, or you just might not be able to travel after all. The idea was considered a bad one in 2012 when first proposed. But when it surfaced again in late 2015, Congress and the President were all for it. Of course, the devil is in the details. And nine months after the IRS passport law was passed by Congress and signed by the President, many details remain unclear. The joint explanatory statement about the law is here, beginning on page 38.
State Department (not the IRS) can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt of more than $50,000. Yes, there are two agencies involved, but the IRS is the one trying to collect. That means no new passport and no renewal, and it could even mean the rescission or cancellation of your existing passport. The State Department is supposed to act when the IRS gives the State Department the word.
And that is where there is some good news, for it does not appear that the administrative wheels have worked out the details. Still, the idea of an inter-agency fix upsets some people who think the IRS shouldn’t be involved in passports at all. But the threshold of $50,000 in unpaid federal taxes is supposed to cut out small fries and focus on the bigger tax debts the IRS is trying to collect. At least the list of taxpayers will be compiled by the IRS. Notably, the $50,000 figure includes penalties and interest, which can add up quickly. If you are contesting a proposed tax bill with the IRS or in court, it is not yet a tax ‘debt.’