Here’s a fact from the last month of the year that I bet you didn’t even know. Our government has made a major change to the way it aims to collect taxes.
Buried, no submerged deep in the transportation bill passed by Congress in December was a bold, brand new power given to the IRS. If you have a federal tax debt amounting to $50,000 or more, starting this month, the IRS can get your passport cancelled by sending a message to the State Department to do so. And guess what? That $50,000 includes penalties and interest.
Yes, people should pay our government what they owe, especially if they want to leave the country. But given the mistakes the IRS has already made in wrongfully emptying bank accounts and seizing assets, does anyone really think it’s okay for unaccountable, unelected bureaucrats to seize passports? That they should have the power to block a basic freedom – the freedom of movement?
The new IRS law can be a big pain in the neck, since the federal government is also moving to enact a new identification card to supplant state identification (which is usually a drivers’ license). That means in the interim is that travelers could be forced to use their passports at the airport check-in counter even for domestic travel.
The new law, entitled “Revocation or Denial of Passport in Case of Certain Tax Delinquencies,” could mean that taxpayers will even be rejected for passports when they try to renew them.
The new IRS powers mean that, now more than ever, taxpayers are being walled in. Americans have renouncing their U.S. citizenship in record numbers, with some analysts arguing that many taxpayers are doing so because of the long reach of the U.S. tax man.
The Joint Committee on Taxation says the IRS’s new passport powers are expected to raise $398 million over 10 years (see here). Currently, there are an estimated seven million U.S. citizens living abroad. People who live overseas often use their passports to check into hotels or open bank accounts, among other things.
Does anyone think the IRS’s execution of its new passport revocation power will be state of the art?
Meanwhile, the IRS has been seizing bank accounts from small businesses if the entrepreneur is making a series of small bank deposits, as it seeks to collect on an estimated $450 billion in unpaid taxes.
Moreover, the IRS has seized bank accounts of small businesses without any warning, much less a warrant. That happened in August 2013 to Carole Hinders, owner of a Mexican restaurant in Arnolds Park in northwest Iowa. Hinders said the IRS seized about $33,000 from her checking account. Even though she was never accused of committing a crime, the IRS was suspicious because she made frequent small deposits. The IRS can seize accounts even though no charges have been filed, much less convictions won.
As with the Hinders’ case, the problem with the new passport revocation law is that the IRS can simply cancel your passport merely by alleging that you owe them money. It doesn’t have to get a judge’s okay or even a court review to do so. In most cases, a passport will be rescinded if a lien has been filed. It also doesn’t give taxpayers the chance to fight the IRS’s decision in court before their passports are yanked, because the IRS operates on a “guilty until proven innocent” mode.
So it’s breathtakingly mindless for the White House and Congress to give the IRS even more powers, given that the agency has been caught in political audits of conservative groups and has made numerous errors in cracking down on taxpayers.
For example, just last September, the Treasury Inspector General for Tax Administration, a federal watchdog unit, raised the red flag for potential errors in the IRS’s enforcement of taxpayers who live overseas.
The inspector general said that “planned improvements have not been made to manage and track correspondence with international taxpayers.” It found that the IRS issued 855,000 notices to U.S. citizens living overseas in 2014. However, the watchdog noted that “IRS data systems aren’t designed to accommodate the different styles of international addresses, which can cause notices to be undeliverable.”
It warned that “current IRS processes for addressing international mail issues are ineffective or nonexistent.”