U.S. Passport Revocation Could Affect 360,000+ Taxpayers Worldwide

The U.S. Internal Revenue Service (IRS) has confirmed press reports that more than 362,000 U.S. citizens could lose their passports due to delinquent tax debt exceeding $51,000.

Included in the 2015 highway bill, signed into law by the President on 4 December 2015, is a revenue-raising provision that requires the IRS to work with the State Department to revoke or deny the passport of any taxpayer with “seriously delinquent tax debt.”

A seriously delinquent tax debt is defined as a tax liability that has been assessed (as opposed to merely asserted) of an amount greater than $50,000, and for which the taxpayer has exhausted all administrative appeal rights. That amount includes penalties and interest in addition to the taxes. The statutory $50,000 amount is adjusted annually for inflation, and is $51,000 in 2018. 

IRS and the State Department began implementing the law 1 January 2018. Notice 2018-1, provides detailed information about the provision and its implementation. Generally, when notified of a qualifying delinquent debt, the State Department will give the taxpayer 90 days to resolve the issue, typically by arranging for payment of the debt. 

The $51,000 amount might seem high enough that few taxpayers would be affected, but according to statistics published in the Wall Street Journal and confirmed 5 July 2018, by IRS, there are more than 362,000 citizens with assessed debt of that amount or greater and who have exhausted administrative remedies. Many of those taxpayers reside abroad, and will be seriously affected by the potential loss of a passport.

The problem is exacerbated by the limited remedies afforded by the statute and IRS interpretation of it. If a passport is denied, the taxpayer’s sole remedy is to litigate the issue.

Related: U.S. IRS Launches New Audit Campaigns Targeting Nonresidents

How This Impacts Mobility

Companies with employees who are assigned overseas, or who work temporarily in other countries, will need to make sure that such employees do not have tax debt sufficient to run afoul of the passport revocation provision. If such an employee has a passport revoked, movement between countries will become impossible and business disruption will occur.

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