Your Passport Can Be Blocked

Declared dead, non functioning
BY: ORLANDO GOTAY

I’ve written before about passport nonrenewal and seriously delinquent tax debt.  When the provisions took effect in 2015 the IRS, Treasury and State Departments “set up shop” for this.  The tax court, one of the places where one can petition for review (the other being regular federal court), created new procedures for passport cases.

To review, “seriously delinquent debt” is tax debt owed to the IRS—tax, penalties and interest, if the total is in excess of an amount, currently $51,000, on which a lien has been filed. When there’s seriously delinquent debt, the IRS notifies the taxpayer and the State department. Once State receives notice it will not renew a passport (except perhaps in life or death situations) and may even revoke one.

As of August 31, 2018, a total of 272,656 taxpayers have been certified as seriously delinquent. That’s an astonishing number. So far 17,000 have been taken off the list, but that’s still quite a few, plus new additions. This is happening, folks.  A new cottage industry now stands.

Passport nonrenewal may be unpleasant to stateside dwellers, but could be an unmitigated disaster to a resident of a foreign country. Imagine going for passport renewal just prior to renewing a Residente Temporal permit and learning you won’t be getting one. In one fell swoop, you have no passport, and you may also become illegal, or “lose time” in the Mexican residency clock.  Yes, nonrenewals can have serious collateral consequences.

The surprise may arrive the day the consulate tells you it won’t renew.  Why learn then and not earlier?  Does the IRS have your correct address? Some may think that the ostrich approach helps and will not update address information with the IRS. If the IRS will send a passport notice where you won’t get it, it does you no good, and the passport still does not get renewed. Make sure the IRS has a current address for you. If you file returns yearly, address updates are automatic. If for other reasons you don’t file, a form is available for address updates.

Running the clock on IRS collections is not viable for expats.  The moment you reside outside the U.S., the collections statute of limitations stops. Debt will not disappear by itself.

Installment plans, offers in compromise—and paying outright—are some of the ways to get off the list. Congress wants you to address the debt, and passport nonrenewal is but the latest stick.

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies.  His love of things Mexican has led him to devote part of his practice to federal and state tax matters of U.S. expats in Mexico.  He can be reached at tax@orlandogotay.com or Facebook: GotayTaxLawyer.  This is just a most general outline. It is informational only and not meant as legal advice.