President Obama signed a highway and transportation spending bill titled “Fixing America’s Surface Transportation Act” or the “FAST Act” (P.L. 114-94) which takes effect January 1, 2016. The legislation contains two significant back tax collection provisions of which you must be aware. First, is a new tax code section authorizing the government to revoke passports if you owe back taxes. Second, is a provision directing the government to hire private tax collectors.
How can the Government Deny or Revoke a U.S. Passport if I Owe Back Taxes?
The FAST Act adds Section 7345 to Title 26 of the US Tax Code. The new section authorizes the government to deny the application for a new passport or renewal of an existing passport if you owe more than $50,000 in back taxes of “seriously delinquent tax debt.”
What Does the Government Consider a Seriously Delinquent Tax Debt that can lead to the Revocation of my Passport?
The term seriously delinquent tax debt is defined as back taxes in which the government files a Federal Tax Lien or taxes in which the government has issued its prerequisite to levy.
Excluded from the definition of a seriously delinquent tax debt is a tax being paid under an installment agreement, offer in compromise, or if collection is suspended under a collection due process hearing.
The passport suspension rule is similar to New York’s enforcement provision with respect to the suspension of driver’s licenses for unpaid taxes. As long as you are working on or have executed a tax settlement, payment plan, or some alternative to collection, the government will not suspend your passport. The key is opening the lines of communication with the IRS and being proactive in resolving your tax debt.
Can I enter the US if I Owe Taxes?
Yes, under the FAST Act the government could revoke a passport upon reentry into the U.S. If the government decides to revoke a passport, they can limit a previously issued or issue a limited passport exclusively for return travel to the United States.
Congress added a provision permitting the Secretary of State to issue a passport, in emergency circumstances or for humanitarian reasons.
The Hiring of Private Tax Debt Collectors
The FAST Act directs the IRS to contract with private collection agencies. The government hired private tax debt collectors twice in the past and, according to the IRS and Taxpayer Advocate, the effort was ineffective at collecting back taxes. Congress ignored both the IRS Commissioner and Taxpayer Advocate because the use of private tax collectors projected revenue of $2.4 billion over 10 years.
Private tax debt collectors will be used on inactive tax receivables exclusively. The FAST Act defines an inactive tax receivable as a case the IRS has removed from its active inventory because of a lack of resources or inability to locate the taxpayer, a case where more than 1/3 of the collection statute of limitations period has elapsed and the case has not been assigned to an IRS employee, or a case where more than 365 days have passed without interaction between the IRS and the taxpayer.
The FAST Act precludes the IRS from contracting out cases where the taxpayer:
- has a pending or active installment agreement or offer in compromise;
- proposed innocent spouse relief;
- is under examination, litigation, criminal investigation, or levy;
- is under age 18; and
- is in a combat zone or deceased.
Therefore, the cases which will be delegated to private debt collection agencies are finite taxpayer accounts.
The tax debt collection agencies must adhere to the Fair Debt Collection Practices Act.
Contact Tax Attorney Todd S. Unger, Esq. Today
The FAST establishes a Special Compliance Personnel Program Account which is dedicated exclusively to fund IRS collection personnel such as the Automated Collections Unit (ACS) and Revenue Officers. Therefore, if you have not addressed your delinquent tax debt, then you must act now. The key to avoiding the enforcement provisions of the FAST Act is making a proposal to such as an offer in compromise, applying for innocent spouse relief, requesting an appeals hearing, installment agreement, filing bankruptcy or challenging the tax debt owed. The Law Offices of Todd S. Unger can help you stop IRS enforcement action and resolve your back taxes. There is not time to wait. The provisions of the Fast Act are effective January 1, 2016. To avoid enforcement action, speak to tax attorney, Todd Unger today (877) 544-4743.