How a ‘seriously delinquent tax debt’ could get your passport revoked

Travelers, be warned: The federal government may revoke your passport should you ignore an enormous tax bill.

Such punishments have change into more frequent lately, experts said.

Federal law requires the IRS and Treasury Department to notify the State Department if an American has a “seriously delinquent tax debt.”

This can be a large federal debt — of greater than $62,000 in 2024 — that the taxpayer has repeatedly ignored.

The debt threshold includes aggregate total federal tax liabilities, plus penalties and interest, levied against a person. It’s adjusted annually for inflation.

The State Department generally won’t issue a recent passport and will revoke or limit an existing one in cases of great delinquency, in accordance with the IRS.

The federal government typically uses this enforcement mechanism — which has been in place since 2018 — as a kind of last-ditch effort to gather unpaid tax levies, experts said.

Should those debts remain unpaid, the potential consequences are ample: Travelers may not have the option to take trips overseas until they’ve resolved their debt. Expats and those that travel abroad for business can have to return to U.S. soil indefinitely until their tax case concludes, for instance, experts said.

Revoking a passport is “a step of last resort,” said Troy Lewis, an authorized public accountant based in Draper, Utah, and an accounting and tax professor at Brigham Young University.

“How do you get wealthy folks’ attention regarding paying their taxes? Just be sure they cannot summer in Europe,” he said.

Demand to travel abroad has surged because the Covid-19 pandemic has waned. Americans applied for about 21.6 million U.S. passports in fiscal 2023 — a record number, in accordance with the State Department.

Todd Whalen, a CPA based in Denver, has seen tax enforcement efforts involving passports ramp up over the past three years.

“That is becoming an increasing number of of an enormous deal,” said Whalen, founding father of Advanced Tax Solutions, which helps consumers and businesses resolve tax debts. “We have gotten several [cases] this 12 months.”

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In a single instance, a client only discovered his passport had been revoked while on the airport attempting to fly to Mexico for a visit to rejoice his son’s highschool graduation.

“It really works,” Whalen said of the gathering effort. “It gets people to call [the IRS].”

A State Department spokesperson declined to supply annual statistics on what number of taxpayers had their passports revoked or denied. The IRS didn’t comment by press time.

It might be “quite easy” for overdue tax debts to exceed the $62,000 threshold, in accordance with Virginia La Torre Jeker, an attorney who makes a speciality of U.S. international tax law.

Americans living abroad, for instance, can have “significant penalties” for not filing various foreign information returns, she said in an email.

Generally, that might mean the taxpayer hasn’t responded to prior IRS notices of a federal tax lien, for instance. (A lien is the federal government’s legal claim to a debtor’s assets like real estate and other personal property. It is not a move to gather said property, though.)

Various courts have upheld the federal government’s ability to revoke passports to be able to collect tax debts as constitutional, Lewis said.

He pointed to 2 recent cases as examples: Franklin v. United States within the U.S. Court of Appeals for the fifth Circuit and Maehr v. United States Department of State within the U.S. Court of Appeals for the tenth Circuit.

In the previous, the defendant, James Franklin, owed about $422,000 in taxes for failing to file accurate tax returns and report a foreign trust of which he was the useful owner. The IRS ultimately filed a tax lien and levied his Social Security advantages, and the State Department later revoked his passport.

“It seems pretty much established that is something [the government] can do,” Lewis said.

The State Department doesn’t revoke a passport right away. When the IRS certifies debt as seriously delinquent and alerts the State Department of that, it’s going to mail the taxpayer a notice — CP508C — outlining the potential implications of that classification.

If a person then applies for a passport, the State Department would generally deny and shut that application if the person doesn’t make efforts to pay their debts. Such efforts might include paying the balance in full, moving into a payment plan or making a compromise agreement with the IRS.

The debtor would still have the option to make use of an lively passport, in the event that they have one, unless notified in writing by the State Department that their passport had been revoked or limited, the IRS said.

“IRS looks at various aspects, including taxpayer noncompliance up to now and taxpayer failure to cooperate with the IRS” when opting to revoke a passport, in accordance with La Torre Jeker.

The State Department can limit the passport’s use only to return travel to the U.S., thereby stopping the person “from being trapped in limbo” if outside the country, she said.

The IRS sends taxpayers Letter 6152 before revocation, asking them to call the IRS inside 30 days to be able to resolve their account and avoid passport cancellation, she added.

Still, sometimes passport denial catches debtors by surprise once they travel, said Whalen at Advanced Tax Solutions.

For instance, the IRS can have the incorrect address on file — especially if a taxpayer has moved — and mail notices to the incorrect place, Whalen said.

“Plenty of times, they do not know they’ve a balance due until they … show up on the airport,” he said.