The U.S. Internal Revenue Service (IRS) is preparing to implement its authority to certify to the U.S. State Department an American citizen's "seriously delinquent tax debt." The State Department may then refuse to issue, or even can revoke, the person's passport.
According to the IRS website, seriously delinquent tax debt is "an individual's unpaid, legally enforceable tax debt" totaling more than $50,000, including interest and penalties. There are certain types of debt that are excluded from that definition, including timely payments being made under an agreed installment plan.
Before denying a passport, the State Department will hold the application for 90 days, time to resolve any errors, make full payment or reach a payment agreement with the IRS.
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Nigel Green, founder and CEO of financial advisory firm deVere Group, said in a Thursday press release:
As President Trump hits out at the judge who has blocked his travel ban for citizens of seven Muslim majority countries, there are more travel complications from U.S. authorities being introduced – ones that could prevent U.S. citizens from travelling internationally.
The IRS is to have a new tool to collect taxes. The new law will use the threat of stopping people being able to travel by revoking passports if there are unpaid taxes. It was passed by Congress in 2015 … .
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This latest move would likely affect Americans living abroad most acutely for two reasons. First, because they would typically use their passports more often – not only for travel but for administrative matters, such as rental contracts, in their countries of residence.
And second, since the worldwide rollout of the highly controversial Foreign Account Tax Compliance Act, or FATCA, in 2014, tax returns have become more complex, onerous and burdensome for U.S. expats due to additional reporting requirements.
Green also has launched a lobbying and media effort — Repeal FATCA — to persuade President Donald Trump to "reverse a fatally flawed, misguided law." Among other things, FATCA requires all non-U.S. financial institutions in every county to report data to the IRS on all specified U.S. accounts in that country. Failure to do so, according to Green, allows the country's financial sector "to be hit with crippling penalties that will tank its economy."
The IRS website notes that the agency has not yet begun certifying tax debt to the State Department, but that such certification will begin "in early 2017." The IRS said it will update the webpage when the process is implemented.