IRS and your Passport, Driver’s License, or Professional Licenses?
At Green Valley Tax Services, Inc, we are dedicated to helping you make the best decisions for your business. Our services include tax planning resolving tax authority problems and audits. When we consult with our business owner clients, one issue that comes up is which business entity is best for them, and it varies with each client.
The Internal Revenue Service (IRS) can take your passport, driver’s license, and professional license in certain circumstances. If you fail to pay taxes, the IRS may freeze your accounts and seize assets. If you have unpaid federal debt or owe money to the government for any reason, you could lose your passport and other documents.
However, the goal of the IRS is not to endlessly punish you, or else they could never get the money that is owed. That is good news for most taxpayers because it typically means there is wiggle room available to negotiate a settlement, enter a payment plan, or work with an Enrolled Agent (EA) or a tax attorney to resolve any back taxes or debt to the IRS.
What Happens if I Don't Pay Taxes
The IRS will assess penalties and interest if you don't pay your taxes. These are separate from any criminal penalties you may be charged with if the matter goes to court.
The IRS also has tools that are applied if it believes you have intentionally tried not to pay your taxes. For example, by declaring bankruptcy for the express purpose of hiding assets from the government or making off with funds before they can be seized.
If you still don't pay up after all this, the IRS can seize your assets and sell them at auction to recoup some of what they're owed. For instance, if you have a brand-new Audi TT A6 Coupe but owe $70,000 in serious delinquent taxes, you may not be driving that beautiful vehicle around much longer.
What is a Seriously Delinquent Tax Debt
If you owe $50,000 or more in taxes, the IRS can take your passport—and that's only the start of what they could seize. In addition to your passport, driver’s license, and professional licenses (such as a therapist or electrician), the IRS can also take other property such as bank accounts, real estate, boats, cars, and all of your assets.
Even if you don't have any of these things that they want to take away from you (luckily for most people), your life won't be easy once this happens. The IRS will automatically suspend all payments on any pending tax debt until it has received full payment for anything owed over $50K (or $100K for married couples filing jointly).
Can the IRS Take My Passport?
If you owe more than $51,000 in taxes, the IRS can take your passport. The agency will not confiscate it without giving you a chance to prove that you have paid your taxes and have a payment plan in place.
If you owe less than $51,000 in unpaid tax debt and have filed for bankruptcy protection or are under a court-ordered payment agreement with the IRS, then they cannot seize your passport (unless it is part of a separate legal action).
However, if the IRS has proof that you willfully failed to pay taxes on time (for example, if they know that you filed fraudulent returns), they may take action against your passport even if your total balance due is less than $51,000.
Can the IRS Take My Driver's License?
The IRS can take away your driver's license if you haven’t been filing your tax returns and paying your taxes. This is because they will revoke your driver’s license if you don’t comply with their rules. If this happens, it will be harder for you to get around town and drive to work or other places that need transportation. You may also want to consider how this action might affect those who depend on you for transportation, such as children or elderly parents who live with you.
This rule varies by state, and it is not taken lightly because the agency understands how essential a vehicle is to earn a living. In most cases, they will capitulate if you can show you are working towards paying the debt, and your driving ability is critical for that repayment.
Can the IRS Take My Professional License?
The answer to this question depends on the type of professional license you have, and the type of tax debt owed to the IRS.
- If your license is a CPA, lawyer, or accountant registration, it may be revoked by court order if outstanding balances are due to the IRS.
- If your professional license is not issued by the state board (such as real estate brokers), it cannot be taken from you without good cause.
However, if you owe back taxes from an unpaid balance due to a previous audit or lawsuit against you—even if those debts were paid off—these could be grounds for revoking said licenses.
Again, the IRS will want to work with you to find a resolution. They understand that the most likely best way for you to repay the debt is with your work.
What Other Collection Actions Does the IRS Use?
In addition to the passport and driver's license, the IRS can take several other collection actions. The IRS can seize your bank accounts and other property, such as real estate or vehicles. They can also garnish your wages, making it harder for you to make ends meet. To avoid these collection actions, it’s always best to pay what you owe on time if at all possible.
It is one of the most frustrating situations when you have your wages garnished. The IRS works directly with payment processors to ensure they receive that money first. It becomes an automatic deduction like Medicare or social security. It can be ruthlessly embarrassing to your boss or if your HR department finds out.
How Do I Get My Documents Back?
If you are facing tax debt, you may wonder how to restore your documents. Here are some options for getting them back:
- File an installment agreement so that your taxes are paid off over time.
- File for a payment agreement so that you can pay your taxes over time instead of paying the total amount in one lump sum.
- File an offer in compromise if your financial situation is too difficult to make total payments towards your tax debt.
- File innocent spouse relief if you were married at the time of filing and believed that it was actually your spouse who committed fraud that caused a substantial portion of your tax debt.
- File for a tax court petition if another party has committed fraud against you and used your social security number or other information about yourself to commit crimes such as identity theft or property damage (such as destroying property).
Everything begins when you establish that either you will repay the debt in some form, or you are not responsible for the debt. The IRS wants to know if the money will be accounted for in some fashion before it will move on your documents.
How to Prevent this in the Future
The IRS has the power to take your passport, driver's license, or professional license if you owe more than $51,000 in back taxes. That can be a massive deal for many people, as passports are required to travel abroad for personal and business, and driver's licenses are required for driving.
If the IRS does decide to seize your property and personal items like these, they must also notify you of it before they start enforcing their decision. Again, the notice should include an explanation of how much time you have left before enforcement begins.
The best way to avoid these situations is to pay your taxes on time or set up a payment plan that shows you are doing everything you can to pay on time. Intent matters to the IRS. Finding a qualified professional tax service is the surest way to have your taxes in order so you can find the financial resources to avoid having your documents seized.
At Green Valley Tax Services, we have spent years working with clients to prevent any surprises from the IRS. We provide a clear picture of where you are and what to expect from taxes so you are not blindsided and can plan appropriately. Give us a call today, and let’s schedule a consultation to ensure your taxes are properly managed for the upcoming year.