You May Lose Your Passport if You Don’t Pay Your Taxes

The US government is making it harder than ever before to have outstanding tax debts. Under a new law, Americans could be forced to forfeit their passports, or have outstanding applications rejected, should they have bills to pay to Uncle Sam.PassportPic

The Current Tax System

This actually isn’t a new concept. People who are currently under tax liens already lose their passports to stop them fleeing the country with their assets. Under the new rules, a tax lien wouldn’t have to be issued before a passport is revoked.

What’s the New Threshold?

The new rules would state that anyone with $50,000 or more outstanding would be eligible to lose their passports. This has big implications for Americans all over the country, but it also has even bigger implications for Americans abroad.

Even though Americans may live abroad, they can currently avoid paying tax bills by staying away from the country. This new legislation would enable the US government to revoke passports, thus stranding the person abroad and forcing them to come home.

It’s unclear how many Americans would be affected. Currently, about seven million Americans work abroad, but it isn’t known how many of them have current debts.

If Implemented…

If the bill passes, we will see it come into force on January 1st 2016. The key clause in the legislation states that this would immediately apply to preexisting debts. Americans with tax debts who are already struggling to pay would be forced to surrender their passports.

It’s yet another weapon on the US government’s arsenal for defeating tax avoidance and evasion.

Image credit: Tony Webster

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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