IRS issues new passport rules

If you’ve booked a flight to a foreign country, it’s important to check that all your documents are in order.

Strategy: Make sure that your federal income taxes are paid up. Otherwise, your passport could be denied, revoked or limited. You might not be allowed to board the plane!

Sound crazy? It’s not. It all has to do with a little-noticed law enacted a few years ago.

Here’s the whole story: Under the Fixing America’s Surface Transportation (FAST) Act of 2015, a highways appropriation measure, the State Department has authority to take these actions if you have a “seriously delinquent tax debt” exceeding $50,000, including interest and penalties (indexed to $51,000 in 2018).

But the rules haven’t been enforced before this year. Now the IRS has issued new guidance on passport denials and revocations (IRS Notice 2018-1, 1/16/18)

Although passports generally fall under the domain of the State Department, not the IRS, this provision was written right into the tax code. For these purposes, a “seriously delinquent tax debt” is one where:

• A notice of lien has been filed or a notice of levy has been filed by the IRS.
• There’s no existing agreement to repay the debt under an installment plan with the IRS or an offer-in-compromise.
• Collection isn’t suspended because of a collection due process hearing or if “innocent spouse relief” has been requested or is pending.

In other words, the ban may be lifted if you’re doing your best to pay off the IRS or you’re otherwise exempted. Another exception applies to active duty military personnel.

Under the new IRS Notice, if an exception applies, the State Department will not be notified that the taxpayer has a seriously delinquent tax debt and therefore the provision on denial or revocation of a passport will not apply with respect to such taxpayer. In addition, if after the State Department has been notified of a seriously delinquent tax debt, the IRS determines that the tax debt should not have been certified (e.g., an exception applies), it will notify the State Department that the certification has been reversed. The reversal notification will be made as soon as practicable after the determination.

Tip: When a certified taxpayer applies for a passport, the IRS says that the State Department must allow him or her 90 days to resolve the tax delinquency.