Pay Your Taxes or Lose Your Passport

By: David S. De Jong ,Eric J. Rollinger

Related Attorney(s): Mark W. SchweighoferDavid B. Torchinsky Jeremy M. Vaida

Media Type: Alert

The first session of the 114th Congress concluded last month with the enactment of two significant tax laws.

Public Law 114-94: Passports and private tax collectors

Public Law 114-94 permits the denial of a new passport or the revocation of an existing passport for an individual with a “seriously delinquent tax debt,” defined as one in excess of $50,000 (indexed for inflation) where IRS has filed a lien or has carried out a levy. Exceptions exist for humanitarian or emergency purposes. The IRS cannot cause a passport to be denied if taxes are being paid pursuant to an installment agreement or if an Offer in Compromise or innocent spouse claim is pending.

The IRS may also block or revoke a passport for willful or negligent failure to provide an accurate social security number in the passport application.

Additionally, the law restores the ability of the IRS to use private debt collectors for “inactive tax receivables” where it has inadequate resources or cannot locate the taxpayer. Cases with active or pending installment agreements, Offers in Compromise or innocent spouse claims will not be sent to a collection agency nor will those involving minors or decedent estates.

Public Law 114-113: Permanent and extended benefits

Public Law 114-113 made “permanent” a number of business tax benefits including the current expensing levels for capital purchases (indexed for inflation) and the research tax credit (which may be used in part to offset payroll taxes in the first five years). It also made “permanent” in their present form several personal tax benefits, including:

  • The child tax credit;
  • The education tax credit;
  • The earned income credit;
  • The educator expense deduction;
  • The alternative state and local sales tax deduction; and
  • The ability of those over 70½ to make limited charitable deductions directly from their Individual Retirement Accounts (IRAs).

Extended but not made permanent are bonus depreciation (through 2019 but in a reduced percentage during the last two years) as well as the exclusion for forgiven acquisition debt on a principal residence, the mortgage insurance deduction, the qualified tuition deduction and nonbusiness energy credit (all through 2016).

If you have questions about these business tax benefits or believe that your passport is in jeopardy, or if you would like assistance on any other tax planning, examination, litigation or collection matter, please contact a member of Stein Sperling’s tax law department at 301-340-2020.

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