Be forewarned- the government is cracking down on people not paying their taxes. If you are one of the many American taxpayers who the IRS determines has a seriously delinquent tax debt, you may be in jeopardy of losing your passport. This is actually an act that was signed into law by President Obama back in 2015. It’s called Fixing America’s Surface Transportation Act, or FAST Act; and it’s already having quite an impact. It requires the U.S. State Department to deny renewal of (or revoke) the passports of those who have delinquent tax debts. A delinquent debtor is defined as someone owing a tax liability of more than $51,000 in 2018.
The IRS reported that it has collected over $11.5 million dollars from more than 200 individuals who paid their tax debts in order to avoid passport denial. The government wants its money, and has found a way to successfully collect from those who have been reluctant to pay for one reason or another.
If you are one of these delinquent debtors, and maybe have already received notice that your passport is in danger of being revoked, don’t panic. The government is more interested in collecting what you owe them than they are in keeping you from traveling. If they are notifying you of possible passport denial, then they most certainly have your attention, and it’s in your best interest to remedy the situation. There are ways to avoid this penalty while paying the back-taxes that you owe the IRS. The IRS won’t report you if you fall under any of the following circumstances:
- You’ve entered an installment agreement with the IRS to pay what you owe
- You’ve settled your tax debt through an offer in compromise or a Justice Department agreement
- You have appealed a tax levy through IRS collection due-process hearing
- You have requested innocent spouse relief (file Form 8857)
- You are serving in a combat zone
- You are living in a federally declared disaster area
- You are in a bankruptcy proceeding
- You have debts in a non-collectable hardship status
- You are a victim of identity theft
If none of these circumstances apply to you, you’ll need to find a way to pay your debt before they take action on your passport status. Most likely, you won’t be able to pay the amount you owe in full, otherwise you would just write the IRS a check and be done with it. You’ll likely need to make payments.
The quickest way to avoid losing your passport privileges is to work out an IRS payment plan and start making payments on your tax debt. You will need to start by submitting a Collection Information statement to the IRS, which will be reviewed by a tax collector to determine what amount you can pay per installment. The payment amounts are set by the IRS. Once you agree to the terms of a payment plan, it cannot be renegotiated. So be sure you can afford the payments before agreeing. It’s important to send monthly payments even if you are still waiting for your tax payment plan to be approved. Collectors are more willing to work with you if they see you are making voluntary payments while you wait. Just send an amount you are able to afford, using the payment slips and bar-coded envelopes that come in the notices you receive.
There are various ways to pay, including online payments, money orders or checks, credit cards, and over the phone. But installment agreements do come with fees-the current fee can be up to $120. Paying online can decrease this amount. Direct Debit payments are also an option and make for a nice guarantee that you won’t miss a payment or have a late payment, as long as you have sufficient funds in your bank account.
Another option to deal with your tax debt is an Offer in Compromise. While this may be the best route to take for some taxpayers, it is more difficult to obtain than an IRS payment plan. In this case, it’s advisable to hire help from professionals who can negotiate your case for you to get you the best possible terms for paying back your taxes.
It’s more work, but if your Offer in Compromise does get accepted by the involved tax agencies, you can save thousands of dollars. If you owe a high balance, it’s definitely worth looking into! Speaking of high balances, if you owe more than $50,000, you’ll need to submit additional forms and the tax debt cannot be completed online; you’ll need to do it in-person or by mail.
Both of the above options fall under the IRS Fresh Start Program, now called the Fresh Start Initiative. Contrary to its name, it’s not a program in itself, but rather a series of changes to current IRS Collection procedures and policies. Its purpose is to help individual taxpayers and small businesses settle overdue tax liability. Its designed with features that make it easier for taxpayers to pay back their outstanding balances and avoid liens, or to have current liens withdrawn.
There is also a small business installment payment agreement for companies that owe less than $25,000 in back taxes. It’s called an In-Business Trust Fund Express installment agreement. To qualify, you must currently run a business with employees. And once approved, you’ll have 34 months to fully pay off whatever tax debt you owe. Again, you cannot default on your payment agreement, or you will face failure-to-pay penalties and the IRS can revoke your agreement.
There are various reasons for passport denial, but don’t let unpaid back taxes be one of them. You can work your way back to good standing. Enlist the services of tax professionals who know all the ins and outs of tax laws, and will work on your behalf to get the best possible outcome. You’ll feel better not having outstanding debt hanging over your head, and take comfort in knowing your ability to travel won’t be taken away.