By A.J. Gross
U.S. Citizens that owe back taxes could lose their passport if a recent highway bill becomes law.
Both the House and Senate passed $300+ billion highway bills. One provision in the bill will allow the federal government to revoke, deny or limit a U.S. citizen's passport if more than $50,000 of back taxes are owed. If passed, it is estimated this provision would generate about $400 million over the next 10 years. This provision could go into effect starting on January 1, 2016.
According to the new provision, if a taxpayer owes more than $50,000 of delinquent taxes and the IRS files either a lien or levy then the federal government has the right to revoke the taxpayer's passport. The taxpayer is able to stop this process if a formal arrangement is made with the IRS. Formal IRS arrangements include currently non-collectable status, installment agreement, and offer in compromise.
Currently non-collectable status is considered financial hardship by the IRS. This means the taxpayer is unable to pay anything towards the back taxes because the taxpayer is in serious financial difficulties. While in currently non-collectable status, the IRS will not take any enforcement action such as bank levies and wage garnishments. The taxpayer will continue to owe the tax. Furthermore, penalties and interest will continue to accrue.
Installment agreement is an arrangement between the taxpayer and the IRS to pay back the taxes in monthly installments. The IRS will determine the minimum monthly installment amount based on the taxpayer's financial situation. The taxpayer will need to provide the IRS with financial documents for the past three months. The IRS will thoroughly review the financial documents to determine the taxpayer's ability to pay back the taxes.
Offer in compromise is a program to settle your IRS taxes for less. Similar to the installment agreement, the taxpayer must provide the IRS with financial documents for the past three months. The IRS will review the documents to determine if the taxpayer qualifies for an offer in compromise. If accepted, the IRS will agree to settle the taxpayer's back taxes for less than owed.
If you owe more than $50,000 of back taxes, I highly recommend you address the issue right away. The federal government has the capability of issuing bank levies, wage garnishments, and property seizures. But now the federal government may potentially be able to revoke your passport. Don't let your back taxes get worse, seek help now.
A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@
This column was printed in the December 27, 2015 - January 9, 2016.