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If you owe a lot of money to the IRS, you probably shouldn’t make overseas travel plans anytime soon: That unpaid tax bill could prompt the State Department to revoke your passport or reject your application for a new one.
But before you start unpacking your suitcase, here are three things tax pros say you should know if you want to keep your tax debt from sending your passport on the wrong kind of vacation.
1. Communicate with the tower
Things have to be pretty bad for the IRS to come after your passport, says Eli Noff, a tax attorney and certified public accountant at Frost & Associates in Annapolis, Maryland. First, your overdue tax bill has to be more than $52,000, including interest and penalties. (In 2020, the threshold is $53,000.) Second, the bill has to be “seriously delinquent” — that is, the IRS is basically at the end of its rope with you regarding trying to collect payment.
Avoid the headache by responding to the IRS when it contacts you, Noff says. “Usually when you file a tax return and there's a balance, there's a series of notices that the IRS will issue,” he says. “Either a notice of federal tax lien has been filed and your right to appeal has passed, or a notice of intent to levy has been filed and your right to appeal has passed. Once you've passed that, you're seriously delinquent.”
It might take months to get to that point, Noff says, but when it does, fasten your seat belt — the IRS can tell the State Department to deny your passport application or even revoke your current passport.
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2. Brace for turbulence
A government employee probably won’t show up at your door to take your passport away, Noff says. But if you do hand it over, you may not get it back.
“Let's say ... your passport expired and you tried to get it renewed — they can either take it away or they can deny you a renewal,” he says. If you’re out of the country when the State Department puts a ground stop on your passport, it may issue you a limited one that’s good for a direct return to the United States.
3. Escape the holding pattern
Several rule exceptions might keep your passport off the red-eye to nowhere. Bankruptcy can put the brakes on things, for example, as can setting up an IRS debt-settlement agreement called an offer in compromise. Requesting innocent spouse relief might also work, as can living in a federal disaster area, being the victim of tax-related identity theft or demonstrating true financial hardship.
You can also file suit in the U.S. Tax Court or a U.S. District Court if you think the IRS has flagged your passport in error.
“If they're working it out with the IRS — if there's an offer to compromise even, or if there's an installment agreement, or if they're still going through a collections process — the passport revocation measures are not going to take effect,” says James Curtis, a senior manager of international tax services at Hall & Company CPAs & Consultants in Irvine, California.
But if you’re hoping to catch that plane to Paris next week, your passport likely won’t be ready in time, Noff says. All of those options can take the IRS weeks or months to process, he warns. Plus, the IRS has an additional 30 days to tell the State Department to give your passport the green light again.
“Probably somewhere between two to six weeks, I would say, is the quickest turnaround time,” Noff says.
And if you’re also behind on your state taxes, make a plan for that, too, Noff says. Otherwise, you may have trouble renewing your driver's license and car registration — or your nursing license, real estate license or other professional license from the state.
“It's like anything else,” Curtis says. “It does not just go away if you ignore it.”
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