Could This New Law Ruin Your Vacation?

Dec 17, 2015

Do you have any big travel plans coming up soon? Maybe something involving travel abroad? You may want to be sure you are in good standing with the IRS before your long-awaited trip turns into money wasted!

The Fixing America’s Surface Transportation Act, or FAST Act, was signed earlier this month by President Obama. The main purpose of this Act is to provide long-term funding for transportation projects like highways, but it also includes some new tax laws.

According to the FAST Act, the Department of State is to deny all applications for and renewals of U.S. passports for any “seriously delinquent taxpayer”. They are also required to revoke any passports previously issued to a “seriously delinquent taxpayer”. So who is considered a “seriously delinquent” taxpayer? “Seriously delinquent” is defined as having an unpaid, legally enforceable federal tax liability  greater than $50,000, including all interest and penalties, and a notice of lien or levy has been filed. This limit is on the cumulative total amount, not just a per year amount, and will be adjusted every year for changes in inflation and cost of living.

Though the requirements of this law are pretty straight-forward, there are some exceptions. Any taxpayer traveling due to an emergency or humanitarian circumstance may be issued a short-term passport, however, the definition of an emergency is still up for interpretation. Any debt subject to an Offer-in-Compromise, installment agreement, or if the collection has been suspended due to a request by the taxpayer (for collection due process or innocent spouse relief), is not a subject debt and would be exempted. However, this requires the IRS to keep up-to-date records of taxpayers which meet these exceptions, which may or may not be a reasonable probability. That depends on your faith in the efficiency and effectiveness of the IRS.

This new law could potentially affect a large number of taxpayers. If you are a U.S. passport holder and are not sure about where you stand with the IRS, I highly encourage you to get in contact with your William Vaughan Company tax advisor today.

By: Halie Baker, Staff Accountant

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