If You Owe the IRS Over $51,000, It Can Trap You in the United States

The IRS wants you to know: If you owe it more than $51,000 in back taxes, penalties, and interest, then under most circumstances it can and will instruct the State Department to not issue you or renew your passport, leaving you stranded in the open-air prison known as the United States of America. (Full passport revocation is also possible.) The rule is part of 2015's Fixing America's Surface Transportation (FAST) Act, and the IRS intends to begin enforcing it now.

You won't necessarily be trapped in the U.S.A. instantly. When you apply to acquire or renew a passport, the tax attorneys at Caplin & Drysdale explain, "the State Department will generally hold such application open for 90 days to allow the taxpayer a chance to resolve his or her tax delinquency or any other certification issues before denying a passport." So you've got that going for you.

A passport is very important indeed (even though it shouldn't be in a free country). Since 2009 it has been necessary even to return from our northern and southern neighbors. And if you want to hold two such precious documents, either to hedge your bets or just to share significant parts of your life between two different sets of arbitrary lines drawn by different regimes, governments are more and more likely to target you.

The righteously salty Kevin D. Williamson at National Review points outsomething especially awful about this policy: It doesn't even require that your tax liability be in any way criminal. You don't have to have been convicted or even charged with tax evasion or fraud. You merely must owe enough in back taxes plus penalties to cross the $51,000 line. (That threshold will rise with inflation.)

Williamson reminds the IRS and its supposed masters in Congress that "Americans as free people have a God-given right to come and go as they please, irrespective of the preferences of any pissant bureaucrat in Washington. Yes, we curtail people's rights in certain circumstances—when they have been charged with a crime and convicted after due process. Tax fraud is a crime; having unpaid taxes is not."

"Suspending passports in the course of a civil dispute—a civil dispute that may well be in litigation or soon to be in litigation—is banana-republic, totalitarian stuff," he adds, and he's right.

Robert W. Wood at Forbes gives some advice on what to do if you find yourself approaching the threshold of being denied a working passport. "Before a tax debt gets to this stage, the IRS usually sends multiple notices, so you should respond, and keep protesting," he notes. "If you receive an IRS Notice of Proposed Deficiency or Examination Report, prepare a protest before the deadline....A tax debt does not become final if you keep your tax dispute going."

If this eventually fails, then consider "striking a deal with the IRS. It is often not too difficult to get an installment agreement with the IRS to pay your tax debt over time. If you sign one, stick to its terms. Even if your debt is huge, the IRS doesn't call it "seriously delinquent" if you are paying the installments on time."

The Taxpayer Advocate Service, an internal ombudsman of sorts within the IRS, has criticized aspects of the program, after noting (as Matt Welch did at Reason in a 2004 feature) that the IRS has since 1996 been able to do the passport-snatching thing against those who are even $5,000 overdue on child support. As that ombudsman writes on the IRS's own website, there are serious issues with this sort of thing:

Courts have long recognized that the right to travel internationally is a liberty right, protected by the Due Process Clause. See e.g., Kent v. Dulles, 357 U.S. 116 (1958). In the context of passport denial for unpaid child support, courts have found the statute meets due process requirements because it provides for notice and an opportunity to be heard prior to the state agency certifying the unpaid child support to the federal government....

In the context of passport denial for a seriously delinquent tax debt, notice and an opportunity to be heard prior to the certification are limited. The FAST Act only requires two forms of notice to taxpayers who will be certified:

(1) a notice sent to the taxpayer close to or at the same time as the IRS certifies the seriously delinquent tax debt ("contemporaneous notice"), and
(2) language included in Collection Due Process (CDP) hearing notices explaining the potential certification.

Unlike the [notices] in the child support context, currently, the IRS does not plan to provide any additional, direct notice to affected taxpayers beyond the statutory requirements. I believe this lack of notice may not satisfy taxpayers' due process rights under the Fifth Amendment of the Constitution because taxpayers do not have a meaningful opportunity to contest the certifications prior to them taking place.

The Taxpayer Advocate Service later noted that the IRS and State Department are not required under all circumstances to reverse their passport-snatching if you merely pay the debt down below the $51,000 threshold.