Hundreds of thousands at risk for passport denial because of tax debt

Hundreds of thousands of Americans with unpaid tax debts will not be able to apply for or renew passports until their debts are settled, as federal officials step up enforcement of a law passed by Congress in 2015.

The law requires the Internal Revenue Service and the State Department to deny or revoke passports for people who have an overdue tax debt of $51,000 or more, according to the IRS.

The agency recently provided new details on enforcement of the law, which went into effect in February, The Wall Street Journal reported. An IRS spokesman told the Journal that as many as 362,000 people currently hold a tax debt that would make them ineligible for renewal or issuance of passports. The agency is in the process of sending their names to the State Department, which officials hope to have finished by the end of the year.

A State Department official confirmed to the Journal that the agency has already denied passports to people who hold tax debts. Additionally, IRS Division Commissioner Mary Beth Murphy told the Journal late last month that, for now, U.S. authorities are only denying passports, rather than revoking them from people who hold debts.

This means current passport holders with debt of $51,000 or more will be able to travel abroad but will not be able to renew their passports, and those with debt without passports will be denied if they apply for new ones.

Murphy said that, as of late last month, people have paid $11.5 million to settle their debts in order to receive passports. An additional 1,400 people have signed installment agreements, according to another IRS spokesman.

According to the IRS, the amount has been adjusted for inflation and includes assessed tax, penalties and interest. It does not include debts collected by the IRS such as FBAR penalties for not reporting foreign financial accounts and child support. People in bankruptcy, in agreement for installment payments, victims of identity theft and people in federally declared disaster areas are not at risk under the law.

A State Department official told the Journal that the department can issue a passport for emergencies or humanitarian reasons to ensure a U.S. citizen can return to America from overseas.

The IRS will notify, in writing, those in debt at the same time they notify the State Department, and reversal will not be issued until the debtors satisfy their debt.

Copyright 2017 U.S. News & World Report