Tax Debt Could Affect Your Ability to Travel in 2018

: Reese Baker & Associates

  Filed under: Taxes

Tax debt is a tough obstacle to overcome, and the Internal Revenue Service is reminding individuals who are “seriously delinquent” in their tax debt that it could affect your ability to travel in 2018. The law that requires the IRS to notify the State Department of serious delinquent tax debt in order to deny issuing or renewing a passport was passed in 2015 but is now going into full effect in the New Year.

Tax Debt Rules on Travel

In Section 7345 of the tax code, the IRS will notify the State Department of anyone who owes more than $50,000 in tax debt and notifies the debtor that their debt has been certified. The State Debarment will, in turn, deny a passport renewal or even revoke the debtor’s passport.

Resolving Seriously Delinquent Tax Debt

If this happens, the IRS recommends either paying the taxes in full, entering into an installment agreement, or making an offer in compromise. The State Department, as part of their process, will typically give an individual 90 days to resolve the tax debt before denying passport applications. The IRS will make a reversal of tax debt certification if the tax debt is satisfied or becomes legally unenforceable, is no longer seriously delinquent, or the certification is erroneous.

Eliminate Tax Debt in Bankruptcy

Tax debt is generally difficult to extinguish in bankruptcy. In most circumstances, you must pay your tax debt at the end of a Chapter 7 bankruptcy or include the payments in your Chapter 13 bankruptcy repayment plan. However, there are a few instances where Chapter 7 bankruptcy can eliminate tax debt. If you have filed your tax returns for the previous two years before a bankruptcy filing, the tax debt is at least three years old, and you haven’t committed fraud or tax evasion, you can eliminate income tax using bankruptcy. Bankruptcy can only discharge income tax though and can’t be used to eliminate payroll taxes or fraud penalties.

If you’re facing enormous tax debt, it’s usually best to seek out an installment plan directly with the IRS. IF however, the payments put you at risk of defaulting on other payments, it may be a good idea to contact a Houston bankruptcy attorney to find out how bankruptcy protection can discharge other, unsecured debts in order to free up more income to pay off your tax debt.