I like reading about clever solutions to interesting problems (I wish I could say that I like coming up with clever solutions to interesting problems, but I can’t recall that ever happening).
So when I read a story in the Wall Street Journal about a law passed by Congress in 2015 that dealt with people who owed back taxes, I had to tip my hat to the lawmakers.
The law, enforced beginning in February of this year, requires the IRS and State Department to deny passports or revoke them for taxpayers who have more than $51,000 of overdue tax debt.
As soon as I read that, I thought, what a great solution.
If you owe money to the IRS, you shouldn’t be allowed to spend money on travel. If you have the money to travel, then that money should first go towards your legal obligation to pay your taxes.
I would think withholding a passport provides a great incentive for delinquent taxpayers to want to settle their debts.
For now U.S. authorities are denying passports rather than revoking them. Tax debtors with current passports should be able to travel abroad, but they won’t be able to renew their passports; those without passports will be denied them if they apply.
The new enforcement is having an effect: Ms. Murphy said that one tax debtor paid $1 million to avoid passport denial. As of late June, 220 people had handed over $11.5 million to pay their debts in full, and 1,400 others had signed installment agreements, according to an IRS spokesman.
Some people are exempt fro the passport law:
- those contesting an assessment administratively or in court
- those with pending or current installment-payment agreements or offers-in-compromise with the IRS
- many victims of identity theft
- those who have requested “innocent-spouse” relief
- those who have debts in “not-collectible” hardship status
- those who are in bankruptcy
- those who are in a federally declared disaster area
- those who are serving in a combat zone
So the creative law seems to have been carefully thought through and implemented with compassion and common sense.
I remember reading once that creativity and innovation often come from combining two different fields together. And in a strange way, that seems to be what is happening here.
Owing taxes and traveling abroad.
Whoever thought of making one contingent on the other was a genius. It seems like an effective, low cost solution to a non-trivial problem.
And once these people pay off their tax debt, they will be, to paraphrase Southwest, free to move about the world.