On December 4, 2015, President Obama signed into law the Fixing America’s Surface Transportation Act (“FAST”), which requires the IRS to submit the names of individuals who owe taxes to the Secretary of State to revoke, cancel, or limit travel. The law prohibits the Secretary of State from issuing a passport to individuals with a serious tax debt. The law also authorizes the Secretary of State to revoke an existing passport. The effective date of the law is retroactive back to October 1, 2015.
What does this mean for ordinary individuals? If you owe taxes and IRS turns over your name to the State Department, you can be restricted from travelling and may be unable to exit or reenter the U.S.
- Who does the law apply to?
Any U.S. citizen who owes more than $50,000 in federal taxes where a federal tax lien or levy has been filed. The debt must be legally enforceable. In recent years, IRS has been much quicker about filing liens and levies for unpaid balances.
A federal tax debt can arise when you self-report your taxes by filing a return showing you owe taxes and do not make a payment in full. A tax debt can also arise if IRS examines your return and determines there is an error on your return where additional taxes, penalties, and interest are assessed. IRS generally has three years to audit your return from the date you file your return. A six-year rule can apply where IRS later determines you underreported your income by 25% or more. IRS has no time limit to audit a fraudulent return.
The new law is not a new concept. In fact, IRS has been sharing information about taxpayer who have tax debts with Department of Homeland Security (“DHS”) and US Customs and Border Protection for several years (which includes TSA works at airports). The database called TECS is used extensively by the law enforcement community and contains information about individuals and businesses suspected of, or involved in, violations of federal law.
IRS has been providing DHS with the names of taxpayers with unpaid tax balances who travelled to the U.S. for business, employment, or personal reasons. Taxpayers traveling to the United States with unpaid U.S. tax balances can be detained at the border, questioned, and flagged for follow-up enforcement. Taxpayers traveling to the United States with unpaid tax assessments are increasingly being detained at the border.
- What can you do to prevent your passport from being revoked?
The new law requires the debt to be legally enforceable. If you believe you do not owe taxes (i.e. which can arise from identity theft or an IRS error), review your previously filed tax returns and payments. Contact a San Diego tax attorney to review your record with IRS to find out if IRS assessed additional taxes. IRS can audit you through written correspondence, which requires as little as 30 days to respond. If you failed to respond to an IRS correspondence audit, the audit would be closed and a tax bill would be issued. If you never received any notices, it is possible IRS sent the notices to a previous address if you forgot to update your address with IRS. The good news is that options do exist to correct an error.
If the tax balance is legitimate, you can enter into an installment agreement with IRS to pay your balance. The new law requires you to have a balance greater than $50,000. Paying your balance below the $50,000 threshold would require IRS to remove your name from the list. However, it is not clear how long it would take to clear your record with the State Department.
Additional options exist to challenge your tax balance and get your record corrected. If you owe more than $50,000, take immediate action to prevent adverse action by IRS that can prevent you from travelling. Contact our office to speak with an experienced tax attorney who can explain your options and work with you to resolve your tax matter.
The information contained in this article is presented only for information purposes and may not be relied on as legal advice or construed as developing an attorney client relationship. If you need legal advice you should contact an attorney. For more information, please contact John D. Milikowsky, J.D., LL.M. at (844) 444-2889.