How a “serious tax debt” can result in the withdrawal of your passport

Travelers, be warned: The federal government can confiscate your passport in case you ignore a big tax bill.

According to experts, such punishments have change into more common in recent times.

Federal law requires The IRS and Treasury Department must notify the State Department if an American has “serious tax debt.”

This is a big national debt – over $62,000 in 2024 – that taxpayers have repeatedly ignored.

The debt limit includes the entire federal tax debt plus penalties and interest imposed on a person. It is adjusted annually for inflation.

The Foreign Ministry usually will not be issued a brand new passport and may revoke or restrict an existing passport for serious violations, based on the IRS.

The government generally uses this enforcement mechanism – which has been in place since since 2018 – as a last-ditch effort to gather unpaid taxes, experts said.

If those debts go unpaid, the results are far-reaching: Travelers could also be barred from traveling abroad until they repay their debts. Expats and business travelers can have to return to the U.S. indefinitely until their tax case is resolved, experts say.

Revoking a passport is “a last resort,” says Troy Lewis, an authorized public accountant from Draper, Utah, and professor of accounting and taxation at Brigham Young University.

“How do you get rich people to pay their taxes? You just make sure they can't spend the summer in Europe,” he said.

Demand for international travel has increased sharply because the Covid-19 pandemic has subsided. requested about 21.6 million U.S. passports in fiscal 12 months 2023 – a record number, based on the State Department.

Todd Whalen, a Denver-based certified public accountant (CPA), has observed a rise in tax enforcement actions related to passports over the past three years.

“This is becoming increasingly important,” said Whalen, founding father of Advanced Tax Solutions, which helps consumers and businesses repay tax debts. “We have several [cases] this year.”

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In one case, a customer only learned that his passport had been cancelled when he was at the airport about to fly to Mexico to celebrate his son's high school graduation.

“It works,” Whalen said of the fundraising campaign. “It gets people to call [the IRS].”

A State Department spokesman declined to provide annual statistics on how many taxpayers have had their passports revoked or denied. The IRS did not comment by press time.

According to Virginia La Torre Jeker, a lawyer specializing in U.S. international tax law, it can happen “quite easily” that overdue tax debts exceed the $62,000 limit.

For example, Americans living abroad could face “significant penalties” if they fail to file various declarations regarding their foreign information, it said in an email.

The debts can also include tax levies owed by individuals, she added. These can be corporate taxes for which the taxpayer is personally liable or trust fund collection penalties, she said. (The latter refers to withheld income and employment taxes such as Social Security taxes or railroad pension taxes.)

However, experts say that confiscating a passport is usually not the government's first step in collecting overdue debts.

The IRS must have already “exhausted” all other typical collection measures, said Lewis, owner of Lewis & Associates, CPAs.

Generally, this would mean that the taxpayer has not responded to, for example, previous IRS notices of a federal tax lien. (A lien is the Legal claim on a debtor's assets, such as real estate and other personal property. However, it is not a step to collect said property.)

Various courts have declared the federal government's right to confiscate passports to collect tax debts to be constitutional, Lewis said.

He cited two recent cases as examples: Franklin v. United States before the U.S. Court of Appeals for the fifth Circuit and Maehr v. US State Department before the U.S. Court of Appeals for the Tenth Circuit.

In the primary case, defendant James Franklin owed about $422,000 in taxes for failing to file accurate tax returns and reporting a foreign trust of which he was the useful owner. The IRS eventually filed a tax lien and garnished his Social Security advantages, and the State Department later revoked his passport.

“It seems pretty clear that this is something [the government] can do,” Lewis said.

The State Department does not revoke a passport immediately. If the IRS determines that the debt is seriously delinquent and notifies the State Department, it sends the taxpayer a notice – CP508C – Explanation of the possible implications of this classification.

When a person then applies for a passport, the State Department will typically reject and close the application if the person does not make efforts to pay off their debt. Such efforts could include paying the balance in full, arranging a payment plan, or creating a Compromise agreement with the IRS.

The debtor can still use a valid passport (if they have one), unless they have received written notice from the State Department that their passport has been revoked or restricted, the IRS said.

“When deciding to revoke a passport, the IRS considers several factors, including past tax violations and the taxpayer's lack of cooperation with the IRS,” said La Torre Jeker.

The State Department could limit the use of the passport solely to return travel to the United States, preventing the person from being “trapped in limbo” outside the country, she said.

The IRS sends taxpayers Letter 6152 prior to revocation, telling them to call the IRS within 30 days to balance their account and avoid passport cancellation, she added.

Still, debtors are sometimes surprised by passport denials while traveling, says Whalen of Advanced Tax Solutions.

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

“Often they don’t realize they have to pay a balance until they arrive at the airport,” he said.