Passports could be revoked due to “serious tax arrears”

Travelers, take note: If you ignore a hefty tax bill, the federal government could revoke your passport.

Such punishments have become more common in recent years, experts say.

Federal law requires the IRS and Treasury to notify the State Department when a U.S. person has “seriously delinquent tax debts.”

That’s a massive federal debt of over $62,000 in 2024 that taxpayers have repeatedly ignored.

The debt limit includes an individual’s total federal tax liability, penalties, and interest. It is adjusted annually for inflation.

According to the IRS, the State Department generally does not issue new passports and may revoke or restrict existing passports in cases of significant non-payment.

Experts say the government is using the enforcement measures, introduced in 2018, as a kind of last resort to collect unpaid taxes.

If these debts remain unpaid, the potential impacts could be significant: Travelers may be barred from traveling internationally until they are paid off. Expatriates and business travelers, for example, may be forced to return to the U.S. indefinitely until their tax cases are resolved, experts say.

Troy Lewis, a certified public accountant in Draper, Utah, and professor of accounting and taxation at Brigham Young University, said revoking a passport is a “last resort.”

“How do we get the wealthy’s attention when it comes to paying taxes? We just have to stop them from spending the summer in Europe,” he said.

Demand for international travel has surged as the coronavirus pandemic subsides, with roughly 21.6 million applications for U.S. passports filed in fiscal year 2023, the highest number ever, according to the State Department.

Todd Whalen, a Denver-based CPA, has seen increased tax enforcement activity regarding passports over the past three years.

“This is becoming a bigger and bigger problem,” said Whalen, founder of Advanced Tax Solutions, which helps consumers and businesses resolve their tax debts. “We’re seeing some [cases] this year.”

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In one instance, a client only found out his passport had been revoked when he was at the airport preparing to fly to Mexico to celebrate his son’s high school graduation.

“It’s working,” Whalen said of the collection efforts. “People are calling. [the IRS]”

A State Department spokesman declined to provide annual statistics on the number of taxpayers whose passports have been revoked or denied, and the IRS had not commented at press time.

Virginia La Torre Jecker, a U.S. lawyer who specializes in international tax law, said it’s “very easy” for unpaid taxes to exceed the $62,000 threshold.

For example, Americans living abroad could face “significant penalties” for failing to file various foreign information declarations, she said in an email.

Liabilities also include taxes owed by individuals, she added. They could be business taxes or trust fund recovery penalties that taxpayers pay personally, she said. (The latter relate to withholding and employment taxes, such as Social Security and railroad severance taxes.)

But experts say cancelling passports is generally not the first step governments take to collect overdue debts.

Lewis, owner of Lewis & Associates CPA firm, said the IRS must have already “exhausted” other typical collection efforts.

Typically, this means that the taxpayer failed to respond to a previous IRS notice, for example, of a federal tax garnishment. (A garnishment is a government’s legal claim against a debtor’s assets, such as real estate or other personal property, but it is not an action to recover that property.)

Lewis said various courts have upheld that the federal government’s power to revoke passports to collect back taxes is constitutional.

He cited two recent cases as examples: Franklin v. United States, in the U.S. Court of Appeals for the Fifth Circuit, and Marr v. United States Department of State, in the U.S. Court of Appeals for the Tenth Circuit.

In the former, defendant James Franklin failed to file accurate tax returns and failed to report foreign trusts of which he was a beneficiary, resulting in him owing approximately $422,000 in back taxes. The IRS ultimately filed a tax lien and withheld his Social Security benefits, and the State Department later revoked his passport.

“This seems pretty well established. [the government] “You can,” Lewis said.

The State Department does not immediately revoke passports. Once the IRS certifies a debt as seriously delinquent and notifies the State Department, the State Department will mail a notice (CP508C) to the taxpayer outlining the potential impacts of the classification.

If an individual subsequently applies for a passport, the Department of State will typically deny and terminate the application if the person does not make efforts to repay the debt, which could include paying the balance in full, working out a payment plan, or entering into a settlement agreement with the IRS.

According to the IRS, if a debtor has a valid passport, they may continue to use it unless they receive written notice from the State Department that their passport has been revoked or restricted.

When deciding whether to revoke a passport, “the IRS considers a variety of factors, including a taxpayer’s past non-compliance and failure to cooperate with the IRS,” La Torre Jeker said.

The State Department could limit the use of the passport to returns to the U.S., which would prevent the person from being “trapped in limbo” if they are abroad, she said.

The IRS will send letter 6152 to taxpayers before passport cancellation, asking them to call the IRS within 30 days to resolve their account and avoid passport cancellation, she added.

Still, debtors can be surprised when they are denied a passport while traveling, says Whalen of Advanced Tax Solutions.

For example, the IRS may have the wrong address on file and mail notices to the wrong place, especially if a taxpayer has moved, Whalen said.

“In many cases, they don’t realize they have an outstanding balance until they arrive at the airport,” he said.