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New U.S. Law: Pay Your Taxes Or Lose Your Passport

Congress is about to pass a law with a provision that would deny or impede a U.S. citizen’s passport if the person owes more than $50,000 in “seriously delinquent tax debt.”

The provision is part of a bill that will give funding for highways and transit. It would only apply to people who the IRS has filed a lien or levy against and who have not yet worked out a repayment plan to pay the debt off. Exceptions may be allowed for people who are arguing their case or who need emergency travel or are traveling for humanitarian purposes. The bill will go into effect the first day of next year if it passes.

There is little relationship.between owing taxes and passports, but the measure is estimated to raise nearly $400 million over the coming 10 years. That much money would allow lawmakers to help pay for highways without raising the federal gas tax.

“This is going to have an extraordinary impact [in terms of getting people to pay up],” said Dennis Brager, a tax attorney. He says the measure goes too far because for one, it’s not very hard to owe $50,000 since penalties and interest can add up fast. Also, people who get a big tax bill tend to get stressed and then delay taking care of it. But since the IRS typically issues a levy or lien six months after sending the initial bill, citizens may lose their passport for a time while they set up a repayment plan.

Brager is also concerned with how long the State Department may take to decide when a person may be allowed to use the exception for emergencies.

The problems could be even more significant for Americans living abroad. Nigel Greene, who runs the deVere Group, one of the biggest financial advisory companies, said:

Their financial affairs are, typically, far more complex than their counterparts back home

Later, Greene added, “I would urge U.S. citizens abroad … to ensure that their financial affairs are in order and compliant by the New Year.”

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