Tax Debt’s Impact on Your Passport and Travel Plans

For those grappling with tax debt, the implications can extend beyond financial strain. In recent years, the U.S. government has intensified efforts to collect unpaid taxes by leveraging travel restrictions. This highlights the importance of addressing outstanding tax liabilities promptly, especially for individuals who frequently travel internationally.

IRS Certification for Tax Debt

The IRS enforces tax debt through its certification process, which can impact an individual’s ability to travel internationally. Under the Fixing America’s Surface Transportation (FAST) Act, the IRS can certify to the State Department that a taxpayer has a “seriously delinquent tax debt.” A tax debt qualifies as seriously delinquent if it exceeds $59,000, including interest and penalties, and a notice of federal tax lien has been filed or a levy issued.

Once certified, the State Department is notified and can take action against the taxpayer’s passport. This process, governed by Internal Revenue Code (IRC) Section 7345, requires the IRS to notify the taxpayer in writing, offering an opportunity to address the debt before passport-related actions occur. Taxpayers can prevent or reverse certification by entering into an installment agreement or an offer in compromise with the IRS. They can also request a Collection Due Process hearing to dispute an erroneous certification.

Passport Denial and Revocation

When a taxpayer’s debt is certified as seriously delinquent, the State Department can deny new passport applications or renewals and may revoke existing passports. This serves as a strong motivator for taxpayers to resolve their financial obligations. The State Department typically allows a brief window for resolution before taking action.

A revoked or denied passport can disrupt careers requiring frequent travel and hinder personal commitments such as visiting family abroad or attending significant international events. In some cases, the State Department may issue a limited validity passport, allowing the holder to return to the United States.

Resolving Tax Debt for a Passport

Resolving tax debt to regain passport privileges requires proactive engagement with the IRS. Establishing an installment agreement allows taxpayers to gradually pay off their debt, demonstrating a commitment to resolving liabilities.

Another option is an offer in compromise, enabling taxpayers to settle their tax liabilities for less than the full amount owed. The IRS evaluates these offers based on the taxpayer’s financial situation, requiring thorough documentation. Alternatively, taxpayers can request a temporary delay in collection activities if they face financial hardship. Known as “currently not collectible” status, this option provides temporary relief, though it does not eliminate the debt.

Exceptions and Relief Programs

The IRS offers specific relief programs for unique circumstances. Taxpayers in bankruptcy proceedings are typically shielded from passport restrictions, as the bankruptcy court oversees their debts. Additionally, “innocent spouses” unaware of tax inaccuracies made by their spouse may qualify for relief, absolving them of shared debt and passport-related consequences.

Military personnel, particularly those deployed overseas, may also qualify for special considerations. The IRS often provides extensions and relief options for active-duty members to ensure they can fulfill their duties without travel limitations caused by unresolved tax debt.

Impact on International Travel

Tax debt restrictions can significantly affect mobility. For expatriates or individuals with family abroad, the inability to travel can disrupt obligations or prevent participation in critical family events. Professionals relying on international travel for business may face challenges that hinder career growth.

In business, travel restrictions can affect a company’s operations and strategic goals. Executives unable to travel may lose opportunities to secure contracts or manage overseas operations, potentially impacting profitability and competitiveness. Addressing tax debt promptly is essential to mitigate such risks.