Delinquent Tax and Passport Restrictions

by Tom Andrews,CPA

Several years ago I wrote a column that discussed H.R. 22 “Fixing America’s Transportation Act”, upon passage congress included a provision that allows the State Department to revoke, deny, or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in an amount in excess of $50,000.  The new compliance enforcement is supposed to roll out sometime in 2017 although the specific timeline has not been disclosed. The law defines seriously delinquent tax debt as a legally enforceable federal tax liability of more than $50,000  (unpaid taxes, penalties, and interest combined) that has been assessed and for which:

  1. A lien has been filed and all administrative remedies for lien relief have lapsed.
  2. A levy has been issued.

There are a substantial number of expats and foreign employees that do not file income tax returns despite being required to do so. Technology now allows the US government to track expat Americans and coordinate with foreign governments in a way that was nearly impossible in past years.  To make matters more complicated many of  yacht crewmembers have worked on foreign flagged vessels that do not issue W-2’s or 1099’s at the end of the year.  When the employer does not issue wage documentation to the IRS, the IRS might not always send delinquent notifications to the tax payer.    I consult with potential clients on a regular basis that have not filed tax returns in years, while most yachting crewmembers will not owe $50,000 of tax in a single year, that amount  can easily be reached if multiple years are delinquent.

I recently consulted with a yacht crewmember that had not filed in almost 20 years and it is becoming more common that we provide consulting to clients that need multiple years of tax returns to be filed.  Some of these clients need tax returns so that they may purchase a home and others are wanting to establish credits for social security and Medicare.

In order for the IRS to revoke a passport a tax lien must be filed on the tax payer, although not a frequent occurrence tax liens are sometimes filed by mistake. If you are a crewmember that does not have a permanent address or moves frequently you will need to insure that you are always receiving your mail on a regular basis.

Having ones passport suspended or revoked is a serious matter but for a yachting professional it can mean losing one’s livelihood.   It will be interesting to see how this new law progresses, there are some in the legal community that believe that revoking ones passport because of a tax lien is unconstitutional as the right to travel cannot be infringed upon.


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