Behind with the IRS? Americans could soon find their passports revoked

November 23^rd, 2015 (ICR News) The US Congress is expected to enact a law denying or revoking passports for US citizens that owe money to the Internal Revenue Service (IRS), the Wall Street Journal reported on Friday.

Under the new law, included as part of an unrelated highway funding bill, and that is expected to take effect January 1^st, the US State Department will block Americans with “seriously delinquent” tax debt from receiving new passports and will be allowed to revoke existing passports of delinquent taxpayers.

The law would apply to those who owe the IRS a combined total of $50,000 or more in unpaid federal taxes, penalties and interest, according to the Journal.

In most cases, the passport provision would apply if a taxpayer is subject to a lien, which advises creditors of a debt to the IRS, or a levy, which gives the IRS the authority to seize assets. It wouldn’t apply if a taxpayer is in the process of resolving tax debt with the IRS, such as by paying it on an installment plan, or if the taxpayer is contesting the collection either administratively or in court, David Kautter, a partner at the accounting firm RSM in Washington, told the Journal.

“If this bill becomes law, it will be imperative for Americans traveling abroad or living abroad to pay attention to IRS notices—assuming they receive them,” Kautter said.

The Joint Committee on taxation estimates that cracking down on delinquents in this manner will raise $398 million over 10 years.

It’s unclear just how many Americans abroad this would affect but the Journal notes that “a report issued in September by the Treasury Inspector General for Tax Administration … found that the IRS sent 855,000 notices to U.S. citizens abroad in 2014.”

However, many US citizens living abroad may never receive such notices, according to a report by the Treasury Inspector General for Tax Administration.  According to the report, “IRS data systems aren’t designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.”

The rule would most impact the some 8 million US citizens who currently reside abroad, who rely on their passports for daily life.

Charles Bruce, an American lawyer who advises the expatriate group American Citizens Abroad told the Journal, “Americans abroad need their passports for many routine activities of daily life, such as banking, registering in a hotel, or registering a child for school, and mistakes could be disastrous.”

“This is going to have an extraordinary impact [in terms of getting people to pay up],” Los Angeles-based tax lawyer Dennis Brager, a former IRS trial attorney who thinks the measure is too draconian, told CNN Money.

Brager said that it’s not that hard to owe $50,000 because penalties and interest can add up very quickly.

People faced with a big tax bill also tend to get overwhelmed and postpone dealing with it for a while. But the IRS typically issues a levy or lien six months after sending the initial bill. So even if a delinquent taxpayer eventually does come forward to set up a repayment plan, they may lose their passport for a time anyway, Brager told CNN Money.

Nigel Greene of the deVere Group, one of the world’s largest independent financial advisory firms, urged US citizens living abroad to get their dealings with the IRS in order.

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

Last year, Costa Rica ratified the Foreign Account Tax Compliance Act (FATCA) which forces Costa Rican banks and financial institutions to provide the IRS with the names of their US citizen account holders, as well as their account balances and financial transactions.