In short yes. In January 2016 a new law was enacted that allows the Internal Revenue Service (IRS) to rescind your passport if you owe more than $50,000 in taxes.
This number may seem like a lot of money until you take into account penalties and interest. This IRS tax lien can be filed after the IRS:
- Assesses your liability
- Sends you a Notice and Demand for Payment
- Has not received payment in full within 10 days.
Section 2C of the law (26 US 7345) allows for installments or an offer-in-compromise under section 7122, but not later than 30 days “after such agreement is entered into or such offer is accepted by the Secretary.”
While it’s true that a possible that a tax lien could be filed by the IRS by mistake you will still have to prove that it is incorrect. This is an instance when having clear, accessible records is paramount.
Are there ways to avoid a tax lien?
The good news is yes. Here are 5 ways to avoid an IRS tax lien:
- File and pay
- Separate your business and personal expenditures
- Maintain detailed records
- Never owe more than $50,000
- Work with a qualified tax attorney with a heavy accounting or CPA background.
As stated in our July 14 blog the IRS cannot break any laws and does not have the authority to act above the law. However, working with a qualified tax attorney who also is a Certified Public Accountant may be an extra protection and safeguard to your rights.