In 2015, then President Obama signed legislation that allowed the government to revoke or deny passports for persons with certain unpaid tax debts in excess of $50,000. This rule was added as part of a transportation spending bill, likely as one basis to pay for that spending.
This new rule has taken some time for the government to implement, and it is still not done. But, the IRS has given indications that it will start enforcing this rule soon. For example, in February of this year, the IRS announced its intention to begin verifying tax debts for the purpose of revoking passports. During this summer, the IRS added language to certain collection notices that notified taxpayers of the possibility of passport revocation or denial.
Regulations to implement this rule are still pending and many observers believe those regulations will not be completed in the near term. Furthermore, passport revocation or denial would only apply to a “seriously delinquent” tax debt. A debt will have to meet several tests to be considered “seriously delinquent.” A missed quarterly estimate will not meet those tests.
Still, these new rules could significantly impact entrepreneurs or other employees who travel internationally for their business and who are behind on their tax obligations. Those persons should begin to get current on their obligations now. Feel free to contact a member of the McGrath North Tax Group if you – or your client – could be impacted by these new rules.