What happens when people don’t take paying their taxes seriously? The IRS has devised a pleasant way to deal with tax defaulters…by revoking their passports.
No More Vacations to Ibiza
Big tax bills now have a significantly bigger punishment: travel bans. The IRS now has the right to ensure unpaid taxes can cost you that dream vacation.
Where Did This Rule Come From?
In 2015, the U.S. legislature passed a bill that allows the IRS to take action against delinquent taxpayers to increase revenue. This includes the authority to deny or revoke passports for citizens who are behind on their taxes.
The State Department
Although the IRS issues the order, it is the State Department that carries it out. They have the authority to deny a passport to someone with unpaid taxes or impose a travel ban on an existing passport.
There’s More
While travel bans are effective when you’re already within the country, people who have already traveled out may feel they can get away with it, so they can also put a travel ban that limits defaulting citizens from traveling anywhere but back to the US.
What’s The Threshold For This?
Now, the threshold isn’t finite. It is adjusted according to economic fluctuations such as inflation. However, it covers tax penalties, liabilities, and any accrued interests.
The Emphasis of Revoking Passports
By restricting individuals’ ability to travel, the U.S. government has provided the IRS with a tool to collect tax debts without resorting to imprisonment.
Exceptions to the Rule
The rule needs to be foolproof, though. Taxpayers who declare bankruptcy, severe financial crises, and identity theft are exempt from this rule. Several other exemption clauses also clear people who are actively in military service.
Appealing is Easy
Anyone who wants to appeal can resolve their debt. It requires entering an agreement with the IRS or proving that the tax issues resulting in the revocation were unjust.
Dual Citizenship Holders
For people with dual citizenship, using another passport to continue traveling can complicate things further and affect their US citizenship status. They could apply for visas with limited validity outside the US to be allowed to return.
Using a Tax Specialist
When the debt complications are too much, there are tax specialists who can act as liaisons to the IRS. They help defaulters reinstate their revoked documents or get new ones.
The Time to Reinstate the Passport
The IRS doesn’t waste time reversing its decisions. Once tax issues are resolved, they typically reverse bans in 30 days or less. The State Department, however, might take a few weeks to process the decision.
Privacy Concerns
Consequences of Passport Restrictions
International trade could suffer significantly because of these restrictions if industries dependent on global mobility are affected. This may be due to job losses or reduced business opportunities due to bans.
Is The IRS Too Strict?
Many countries use travel restrictions to address tax issues. However, the U.S. system is slightly stricter because it focuses on revoking passports entirely, rather than just restricting travel or issuing temporary travel documents.
Medical Concerns Raised
The anxiety, claustrophobia (if the defaulter is detained), and impacts on both personal and professional lives can cause serious health issues. While ensuring that tax issues are resolved, the government still needs to consider the health of the citizens.
How Effective Is This Method?
Although it may have some negative backlash, it has proven to be one of the most effective methods for handling tax delinquency. But, it doesn’t deal with the underlying issues that cause people to default.
Human Rights Concerns
The restrictions on travel can result in potential human rights violations. However, the legal council sees nothing wrong with the tax laws, and the IRS’s method is considered satisfactory.
So, How Does The IRS Notify People
Before imposing any sanctions, the IRS is required to notify individuals. This notice, typically sent by mail, informs them of the amount owed and provides instructions on how to resolve the debt, either by disputing the certification or reaching a settlement.
Citizens Abroad May Suffer
For citizens with tax issues abroad, they may end up suffering complications that leave them stranded abroad. They need help managing their finances, dealing with their residence status, and, in many cases, finding employment.
What Does the Future Hold?
Many experts predict that this law will change the debt threshold and increase the use of travel restrictions in tax enforcement. It could impact how the government deals with other federal debts.
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