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Pay your taxes if you're planning a trip abroad

013_Tokyo_Narita_International_Airport _Japan_-_ユナイテッド航空
International air carriers on tarmac photo by Marek Ślusarczyk via Wikipedia

Got summer plans? Or maybe they're just wishes.

Eighty-five percent of those who participated in a recent survey by the digital financial services company Ally said they wanted to travel, but financial concerns are putting the brakes on their trips.

And if your dream excursion is beyond U.S. borders, another fiscal issue could keep you grounded.

The U.S. Department of State can pull your passport or prevent its issuance or renewal if you have a substantial unpaid federal tax bill.

Tax amounts that will curb travel: So what exactly counts as substantial? The amount is adjusted for inflation each year, with the 2023 delinquent tax trigger at $59,000.

The law also requires that the Internal Revenue Service file a tax lien or levy on the unpaid bill.

After doing that, the IRS forwards the names of the affected taxpayers to the State Department.

Of course, the agency also lets people with certified debts know of the action. that their names were submitted to the State Department. They get a notice CP508C, contact the IRS to resolve the debt. 

Big tax bill, but passport unaffected: Even if you owe $59,000 or more, your passport might remain valid.

Uncle Sam's tax collector won't alert the State Department if you are paying your big tax bill through an IRS installment agreement or offer in compromise.

Your seriously delinquent tax debt also will not affect your global travel document if you —

  • Are in bankruptcy,
  • Live in a federally declared disaster area,
  • Have been identified as a victim of tax-related identity theft, or
  • Have an account that's been determined to be "currently not collectible" due to hardship.

The IRS will also postpone certification of a serious tax debt for taxpayers serving in a designated combat zone or participating in a contingency operation.

Courts uphold tax limits on travel: The passport/tax connection is not new. It was part of the Fixing America's Surface Transportation Act, or FAST Act, that became law in December 2015.

Passport to adventure_Mike via Flickr CC
Photo by Mike via Flickr

Over the nearly two decades that passport-required travel has been affected by major tax debt, some wannabe international tourists have challenged the law. They haven't had any luck.

Last year, one filing even made it to the Supreme Court of the United States. The country's highest judicial panel, however, declined to hear it, letting the travel document revocation law stand.

Still, litigious potential sightseers keep trying. Most recently, two taxpayers failed to get their tax debt impacted passports activated.

In one case (Gayou, TC Memo. 2023-61), a man whose tax bill over three years reached around $62,000 argued that the IRS erroneously sent his name to the State Department. The Tax Court didn't buy it. The judge determined the IRS acted appropriately.

In the other (Meduty, 160 TC No. 13), a man who owed more than $100,000 in taxes over eight years claimed he never received the IRS' CP508C notice. That didn't matter, according to the Tax Court, which ruled that a flawed or missing notice doesn't make the serious debt's certification erroneous.

Pay your taxes to get your passport: The bottom line here is that the courts don't seem to offer a reliable way to get your passport or get it reinstated if you owe the U.S. Treasury beaucoup overdue tax dollars.

Instead, touch base with the IRS about ways you can resolve your seriously delinquent tax debt.

The sooner you pay all or as much as you can, the sooner you can call your travel agent and get your international excursion back on track.

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