If you owe the IRS a whole lot of tax money, you may lose your ability to travel abroad... if you do absolutely nothing to address the debt.
Oh, and if Uncle Sam ever gets around to enforcing that penalty.
Back in December 2015, Section 7345 of the tax code went into effect and gave the Internal Revenue Service the ability to revoke your passport for nonpayment of taxes. Granted, your outstanding taxes, interest and penalties have to add up to $50,000 or more during the last ten years, a notice of lien has to be filed against you and a levy has to be issued, but it's possible.
Still, you'd have to ignore the fact that you can enter an agreement with the IRS to pay off the debt in installments for that penalty to apply. You'd also have to completely wave off an offer in compromise or settlement agreement with the IRS and reject a collection due process hearing to determine the amount of the levy owed. Then you'd have to completely burn the the 90 days the State Department gives you to sort out errors in your outstanding debt, pay the debt off entirely or enter an IRS installment plan.
"There really has to be willful blindness on the part of the taxpayer to get into this kind of situation," says Barry Weisman of Anchin, Bloch and Anchin. "Just truly ignoring or being in denial about an IRS assessment."
The IRS has only begun sending out notices to taxpayers with that level of debt this year. Several states have resorted to suspending or revoking driver's licenses to coax the payment of outstanding tax debt -- with Weisman noting that New York does so for debt of $10,000 or more -- but the State Department's failure to issue or renew your passport after receiving certification from the IRS has serious implications for a very narrow group of U.S. citizens. Unfortunately for those folks, a large portion of their subset tends to live outside the country. Their are a couple of reasons why expats would be disproportionately affected.