Grace Cary | Moment |
Travelers, be warned: The federal government can confiscate your passport if you ignore a large tax bill.
According to experts, such punishments have become more common in recent years.
Federal law requires the IRS and Treasury Department to notify the State Department if an American has “significant tax debt.”
This is a huge national debt – over $62,000 in 2024 – that taxpayers have repeatedly ignored.
The debt limit includes the total federal tax debt plus penalties and interest imposed on an individual. It is adjusted annually for inflation.
According to the IRS, the State Department generally does not issue new passports and can revoke or restrict an existing passport in cases of serious violations.
According to experts, the government usually uses this enforcement mechanism, which has been in place since 2018, as a last-ditch effort to collect unpaid taxes.
If those debts go unpaid, the consequences are far-reaching: Travelers may be barred from traveling abroad until they pay off their debts. Expats and business travelers may have to return to the U.S. indefinitely until their tax case is resolved, experts say.
Revoking a passport is “a last resort,” says Troy Lewis, a certified public accountant from Draper, Utah, and professor of accounting and taxation at Brigham Young University.
“How do you get rich people to pay their taxes? You just make sure they can't spend the summer in Europe,” he said.
“It makes people call the tax authorities”
Demand for international travel has skyrocketed as the Covid-19 pandemic subsides. According to the State Department, Americans applied for about 21.6 million U.S. passports in fiscal year 2023 – a record number.
Todd Whalen, a Denver-based certified public accountant (CPA), has observed an increase in tax enforcement actions related to passports over the past three years.
“This is becoming increasingly important,” said Whalen, founder of Advanced Tax Solutions, which helps consumers and businesses pay off tax debts. “We have several [cases] this year.”
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In one case, a customer only learned that his passport had been cancelled when he was at the airport about to fly to Mexico to celebrate his son's high school graduation.
“It works,” Whalen said of the fundraising campaign. “It gets people to call [the IRS].”
A State Department spokesman declined to provide annual statistics on how many taxpayers have had their passports revoked or denied. The IRS did not comment by press time.
All other collections must be “exhausted”
J. David Ake | Getty Images News | Getty Images
According to Virginia La Torre Jeker, a lawyer specializing in U.S. international tax law, it can happen “quite easily” that overdue tax debts exceed the $62,000 limit.
For example, Americans living abroad could face “significant penalties” if they fail to file various declarations regarding their foreign information, it said in an email.
The debts can also include tax levies owed by individuals, she added. These can be corporate taxes for which the taxpayer is personally liable or trust fund collection penalties, she said. (The latter refers to withheld income and employment taxes such as Social Security taxes or railroad pension taxes.)
How can you get rich people to pay their taxes? All you have to do is make sure they can't spend the summer in Europe.
Troy Lewis
Professor of Accounting and Taxation at Brigham Young University
However, experts say that confiscating a passport is usually not the government's first step in collecting overdue debts.
The IRS must have already “exhausted” all other typical collection measures, said Lewis, owner of Lewis & Associates, CPAs.
Generally, this means that the taxpayer has not responded to previous IRS notices of a federal tax lien, for example. (A lien is the government's legal claim on a debtor's assets, such as real estate and other personal property, but is not an attempt to collect on said property.)
Various courts have declared the federal government's right to confiscate passports to collect tax debts to be constitutional, Lewis said.
He cited two recent cases as examples: “Franklin v. United States” before the U.S. Court of Appeals for the 5th Circuit and “Maehr v. United States Department of State” before the U.S. Court of Appeals for the 10th Circuit.
In the first case, defendant James Franklin owed about $422,000 in taxes for failing to file accurate tax returns and reporting a foreign trust of which he was the beneficial owner. The IRS eventually filed a tax lien and garnished his Social Security benefits, and the State Department later revoked his passport.
“It seems pretty clear that this is something [the government] can do,” Lewis said.
Travelers have legal remedies available
The State Department does not revoke a passport immediately. If the IRS classifies debt as seriously delinquent and notifies the State Department, it sends the taxpayer a notice—CP508C—explaining the potential consequences of that classification.
When a person then applies for a passport, the State Department will typically deny and close the application if the person does not make efforts to pay off their debt. Such efforts could include paying the balance in full, arranging a payment plan, or entering into a settlement agreement with the IRS.
The debtor may continue to use a valid passport (if he has one) unless he receives written notice from the Department of State that his passport has been revoked or restricted, the IRS said.
“When deciding to revoke a passport, the IRS considers several factors, including past tax violations and the taxpayer's lack of cooperation with the IRS,” said La Torre Jeker.
The State Department could limit the use of the passport solely to return travel to the United States, preventing the person from being “trapped in limbo” outside the country, she said.
The IRS sends taxpayers Letter 6152 prior to revocation, telling them to call the IRS within 30 days to balance their account and avoid passport cancellation, she added.
Still, debtors are sometimes surprised by passport denials while 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 address, Whalen said.
“Often they don’t realize they have to pay a balance until they arrive at the airport,” he said.