Applying for a passport or renewing your passport might not be so easy this year. The IRS and the State Department have begun enforcing a little-known tax law that could affect 362,000 Americans this year alone—as estimated by the IRS. This law could affect expats in particular, because many Americans living on US soil do not have a passport, however, all American expats do have a US passport.
This law—which has been enforced as of 2018—states that if you owe $51,000 USD in overdue taxes, then your passport could be affected. As the IRS states, this tax debt must be legally-enforceable federal tax debt, including interest and penalties.
This policy is very important to the IRS. A few months after they began enforcing the law, as of June 2018, the IRS had received $11.2 million USD from only 220 individuals who had paid their debts in full. Another 1,400 individuals have entered into payment agreements. This law is amounting to some serious money for the IRS.
WHO IS EXEMPT FROM THE PASSPORT TAX RESTRICTIONS:
However, this law will not affect all manners of tax debt. Those who are exempt are:
- Those who have entered into a settlement with the Justice Department
- Those who are in offers of compromise with the IRS
- Those who are paying their debt through an installment agreement
- Those who have requested a collection due process hearing concerning a levy
- Those who have had the debt suspended due to requesting innocent spouse relief
- Those who are in bankruptcy
- Those who can prove they are victims of tax-related theft
- Those who reside in a Federal Disaster Area
- Those who have had debt that the IRS has deemed is currently not collectible
- Those who have put in a request for an installment agreement through the IRS
- Those who have led the IRS to accept an offered adjustment
- Those who are in the process of negotiating with the IRS over paying a lesser amount
IF YOU FALL UNDER THIS LAW, HOW WILL EXPATS BE AFFECTED:
If you have been affected by the new passport tax restrictions, then you will receive a letter in writing from the IRS. The first step is to make sure that it is accurate. Phone the IRS and find out why they think that you owe them money.
The challenge may be actually receiving your letter, seeing as how the letters are often mailed to the last known address. Furthermore, there may be delays in receiving your letter if you have a forwarding address to your new country. Be sure to have your address updated, and try to use a family member’s address in the United States if possible to receive any news.
If you do owe the IRS over $51,000 USD in overdue taxes, then it may affect your US passport application. The IRS will hold your passport application for 90 days to give you an opportunity to resolve these financial penalties. Once you have resolved the issue, to have your passport restrictions lifted, then you will have 30 days to prove to the IRS that:
- The debt is no longer delinquent in any serious way
- The debt is unenforceable
- The debt is fully paid
- The certification of debt was incorrect
The good news is that the restrictions are not a complete shutdown of your expatriate life abroad. The following exemptions will be made for any expats living abroad:
- If you already have a passport, you will be able to use your passport to travel unless specifically mentioned in writing by the State Department.
- If you currently reside overseas, then you will not experience restrictions traveling to US soil
- Your work visa or work permit in your country abroad will still be valid, despite any restrictions to your US passport
- You will have to resolve your finances, but it is unlikely to get deported from the country where you currently reside
- Penalties associated with the Report of Foreign Bank and Financial Accounts are not included by this new tax law
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