New law expected to go in force January 1, and targets taxpayers with large debts.
Both the House and Senate are expected to pass a bill in December that would allow the US State Department to block Americans with “serious tax debt” from receiving a passport and allow them to rescind passports for those with large debt, according to an article on wsj.com.
The measure is part of a highway funding bill, which has had similar versions already passed by both houses.
The Internal Revenue Service (IRS) will be responsible for compiling a list of taxpayers that owe more than $50,000, including penalties and interest. That amount will be periodically adjusted for inflation.
The rule would not apply to taxpayers that are in the process of having a tax debt resolved, which would include paying the debt on some type of installment plan, or contesting the debt through legal means, as in a court case.
It is expected the rule would be applied when a taxpayer is subjected to a lien, and the IRS would have the authority to seize assets, including the passport.
If enacted, the law would raise an estimated $398 million over the next 10 years, and would go into effect on January 1 of next year.
Critics of the bill are saying the number of taxpaying Americans that would be affected is near 7 million, including many living overseas who must have their passports to receive work visas or residency permits.
The new law would make it important for those living overseas to pay close attention to notices they receive from the IRS, with the assumption they will receive them, which some say is problematic.
Charles Bruce, an American lawyer with Bonnard Lawson in Lausanne, Switzerland, said there was a problem with the communication between the IRS and persons living overseas, citing a report by Tigta, a watchdog agency, saying the data systems used by the IRS are not designed to accommodate different types of overseas addresses, thus resulting in mail not being received.
The Tigta report also said the IRS sent 855,000 notices to Americans living abroad in 2014, and the report added the “current IRS procedures for addressing international mail are ineffective or nonexistent.”