The IRS is cracking down on tax scofflaws, but some experts worry the agency is bypassing due process.
The Internal Revenue Service has notified 389,000 delinquent taxpayers they are at risk of losing their passports if they don’t pay up, according to the Taxpayer Advocate Service, an independent organization within the IRS that helps people resolve tax problems. The aggressive approach to tax collection has raised due process concerns among legal experts and tax professionals.
The IRS is required to alert the State Department when it “certifies” individuals owe $52,000 or more in tax debt under the 2015 Fixing America’s Surface Transportation Act. The State Department may then revoke the individuals’ passports or deny passport applications and renewals. Although the law passed in December 2015, the IRS did not begin implementing the tax provision until January 2018. The State Department declined to say how many passports it has actually revoked under the policy.
Taxpayers have a number of options: Besides paying the debt in full, they may pay it off on an installment plan, negotiate a compromise with IRS, reach a settlement with the Justice Department, or enter an IRS relief program. As of mid-May, IRS had removed about 100,000 taxpayers from its list of delinquents, according to the Taxpayer Advocate.
Earlier this month, IRS reminded taxpayers of the policy after the agency issued a procedural update to the Internal Revenue Memo, the handbook for IRS employees, on how to expedite individuals’ removal from the list of tax delinquents.
“It appears that the IRS is not happy with their limited authority,” Jim Buttonow, managing principal of JL Buttonow, PLLC and a tax expert, wrote on the blog IRSMind.
The IRS says it will send a notice to taxpayers of its intent to revoke passports to “give them another opportunity to resolve their debts” within 30 days. But the Taxpayer Advocate said the notice “does not provide taxpayers with an opportunity to come into compliance before the IRS makes the certification.” As a result, the policy “raises due process concerns ... prior to their fundamental right to travel being infringed,” according to the Taxpayer Advocate Service’s 2020 goals report to Congress.
Astrid Lockwood, senior associate at the Federal Practice Group, said the policy might create a “chilling effect” for permanent residents who owe back taxes and for whom becoming citizens “might put [them] on the top of that list.”
Additionally, Lockwood said the policy is concerning for people living abroad because of what are sometimes lengthy delays in mail service. A 2015 report from the Treasury Inspector General for Tax Administration found, “IRS data systems are not designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.” As a result, individuals living abroad may not even know they owe money to the IRS.
“In the months to come, we may find out the true reason that the IRS is nudging taxpayers and the State Department to take more action on certified taxpayers,” Buttonow said. “Most believe that just limiting applications and renewals is not enough enforcement presence to have a real impact on debt collection. We should expect more aggressive enforcement by both the IRS and the State Department in the future.”