As if the weeks leading up to April 15 weren’t stressful enough, Americans may soon find filing their taxes even more nerve-wrecking. The Internal Revenue Service has now claimed the power to revoke passports if significant back taxes are owed.
You read that right.
Signed into law as part of the FAST Act, a new section of the tax code called “Revocation or Denial of Passport in Case of Certain Tax Delinquencies” will allow the State Department to revoke, deny, or limit passports for anyone the IRS deems as “having a seriously delinquent tax debt in an amount in excess of $50,000.”
Details about this law are vague. It could be interpreted to mean no new passport, no renewal, or that the State Department could take back existing passports.
The IRS will work in tandem with the State Department to start revoking passports at $50,000 of unpaid federal taxes. That includes penalties and interest, which can often accumulate quickly. There is a small exception which allows the State Department to issue a passport in an emergency or for humanitarian reasons. However, the law does not specify how long the State Department could take to determine that kind of exception, or really any time frames at all.
And the only way to get your passport privileges back? Simply pay off your massive debt in full or in installment plans. But if you’ve ever dealt with the IRS, you know just how “smooth” this process can really be.
What’s even more frustrating is how easy it is for the more than 6 million Americans living abroad to not even realize that they owe back taxes.
The US federal tax code is complicated. It’s especially complicated when Americans are legally obligated to file US taxes along with the taxes of their current country of residence. That means extra paperwork, conflicting tax deadlines, and trying to keep up with regulations that constantly change.
For expatriates, incorrectly filing with the IRS could easily translate to $50,000 in fees and back taxes, which means a revoked passport. A revoked passport means that the US citizen is stuck, essentially, without any valid form of ID, and has no way to get back. Why should they be punished for the IRS’s lack of clarity and transparency?
Furthermore, this new IRS power has the potential to cause major problems for some domestic citizens because of the REAL ID Act.
Passed in 2005, the REAL ID Act set strict standards for state driver’s licenses and other identification cards in an effort to prevent “terrorists” from obtaining US licenses. Originally, only 22 states complied. Even though the law states that “noncompliant IDs cannot be used to board domestic flights,” the Department of Homeland Security and the Transportation Security Administration haven’t really been enforcing it for the last decade.
However, at the end of 2015, DHS announced that they would begin to uphold the law after a final phase of enforcement. Affected travelers from states that do not comply with the law will have to travel with a passport or another valid form of government ID.
Most states have been granted extensions through October 10, 2016, if they aren’t already compliant. However, three states and one territory remain non-compliant with the law: American Samoa, Minnesota, Missouri, and Washington. By 2020, all states must fully comply with the REAL ID Act.
This has the potential to be a double whammy for those who have been hit with a huge IRS bill and also live in states that are in limbo with the REAL ID Act. Without a valid state ID or passport, they can forget about boarding a flight, domestic or abroad.
Part of the solution to the larger issue here lies within simplifying the current tax code.
Now containing 74,000 pages, the federal tax code has almost tripled in the last 30 years. At the current rate it is growing, it will pass 100,000 pages by 2050.
By eliminating unnecessary verbosity, it would be much easier for taxpayers to read, understand, and comply. This simplification would also make it easier for citizens to file their taxes at home and overseas. And because the IRS now has the power to take passports, it would at least be a step in the right direction to ensure that expats aren’t stranded without an ID with which to return home.