How a ‘severely delinquent tax debt’ can lead to your passport being revoked

Travelers, be warned: The federal government can revoke your passport if you ignore a big tax bill.

Such punishments have become increasingly common in recent years, experts say.

Federal law required the IRS and the Treasury Department to notify the State Department if an American has a “severely delinquent tax debt.”

This is a large federal debt – over $62,000 by 2024 – that taxpayers have repeatedly ignored.

The debt threshold includes the total federal tax liabilities, plus penalties and interest, assessed to an individual. It is adjusted annually for inflation.

The Ministry of Foreign Affairs in general won’t spend a new passport and, according to the IRS, can revoke or limit an existing passport in case of serious crime.

The government usually uses this enforcement mechanism – which already exists since 2018 — as a kind of last-ditch effort to collect unpaid taxes, experts said.

If these debts remain unpaid, the potential consequences are dire: travelers may not be able to travel abroad until they have paid off their debts. Expats and people traveling abroad on business may have to return to U.S. soil indefinitely until their tax case is finalized, experts say.

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

“How do you get rich people’s attention when it comes to paying their taxes? Just make sure they can’t summer in Europe,” he said.

Demand to travel abroad has soared as the Covid-19 pandemic has subsided. Americans requested approximately 21.6 million U.S. passports in fiscal year 2023 — a record number, according to the State Department.

Todd Whalen, a CPA based in Denver, has seen tax enforcement efforts related to passports increase over the past three years.

“This is becoming increasingly important,” said Whalen, founder of Advanced Tax Solutions, which helps consumers and businesses resolve tax debts. ‘We got several [cases] this year.”

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In one case, a client only found out his passport had been revoked when he was at the airport trying to fly to Mexico for a trip to celebrate his son’s graduation.

“It’s working,” Whalen said of the fundraiser. ‘It gets people calling [the IRS].”

A State Department spokesperson declined to provide annual statistics on how many taxpayers had their passports revoked or denied. The IRS had not commented at press time.

According to Virginia La Torre Jeker, an attorney who specializes in U.S. international tax law, it can be “quite easy” for delinquent tax debts to exceed the $62,000 threshold.

For example, Americans living abroad could face “significant fines” for failing to file various returns containing foreign information, she said in an email.

Debts can also include any tax levies owed by individuals, she added. That could include business taxes for which the taxpayer is personally liable, or trust fund recovery penalties, she said. (The latter relate to withheld income and employment taxes, such as social security taxes or railway pension taxes.)

However, revoking a passport is usually not the first way for the government to collect such overdue debts, experts say.

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

Generally, this would mean that, for example, the taxpayer has not responded to prior IRS notices of a federal tax lien. (A lien belongs to the government legal claim on a debtor’s assets, such as real estate and other personal property. However, it is not a move to collect said properties.)

Several courts have recognized the federal government’s ability to revoke passports to collect tax debts as constitutional, Lewis said.

As an example, he cited two recent cases: Franklin v. United States at the United States Court of Appeals for the 5th Circuit and Maehr v. U.S. Department of State in the United States Court of Appeals for the 10th Circuit.

In the first case, the defendant, James Franklin, owed approximately $422,000 in taxes because he failed to file accurate tax returns and failed to report a foreign trust of which he was the beneficial owner. The IRS eventually filed a tax lien and levied his Social Security benefits, and the State Department later revoked his passport.

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

The Ministry of Foreign Affairs does not immediately revoke a passport. When the IRS designates debts as seriously delinquent and notifies the State Department, it will send the taxpayer a notice – CP508C – outlining the possible implications of that classification.

If a person then applies for a passport, the State Department will typically deny that application and close it if the person makes no effort to pay their debts. Such efforts may include paying the balance in full, entering into a payment plan, or making a payment arrangement compromise agreement with the tax authorities.

The debtor could still use an active passport, if they have one, unless the State Department has given written notice that their passport has been revoked or restricted, according to the IRS.

“IRS looks at several factors, including past non-compliance by taxpayers and taxpayers’ inability to cooperate with the IRS” when choosing to revoke a passport, La Torre Jeker said.

The State Department can restrict the passport’s use only for travel back to the U.S., preventing the person from being “left in limbo” while outside the country, she said.

The IRS is sending taxpayers letter 6152 before the revocation, asking them to call the IRS within 30 days to resolve their account and avoid passport cancellation, she added.

Still, debtors are sometimes surprised when their passports are denied while they are 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 place, Whalen said.

“A lot of times they don’t know they have an outstanding bill until they … show up at the airport,” he said.