Is it true that I can lose my passport if I don’t pay my taxes?

Ralph
00:00:00

Are you tossing and turning at night, haunted by the specter of unpaid taxes? Is the thought of your dream vacation turning into a nightmare? Does the airport security checkpoint make your palms sweat? Well, hold on to your passport because today we're exploring a question that might just save your next international adventure and bring you some peace of mind. I'm going to answer the question: Is it really possible to lose your passport if you don't pay your taxes? So stay with me as we uncover the truth behind this alarming possibility and learn how to keep your globe-trotting dreams alive while staying on the right side of the IRS.

Narrator
00:00:37

Welcome to the Ask Ralph podcast, where listening to an experienced financial professional with over 30 years of experience can help you make sense of confusing questions, current headlines and industry trends about taxes, small business, financial decision making, investment strategies, and even the art of proper budgeting. Ask Ralph makes the complex simple by sharing his real world knowledge from a Christian perspective with all things financial.

Now here's your host, Ralph Estep Jr.

Ralph
00:01:07

Thank you for joining me today and spending your time with me. I truly appreciate it. Now, on yesterday's show, we explored the fascinating topic of how to buy a house even when you don't have any income. I shared some eye-opening strategies for those people who have that homeownership dream and how we can turn it into a reality, even if you have no income. So, I encourage you to go check that out.

Today's listener question comes to us from Karen. Now, Karen's facing some serious financial concerns. This is what she wrote: “Ralph, I've been struggling with my finances for the past few years, and I've fallen behind on my taxes. Recently, I heard a rumor that the IRS can take away your passport if you don't pay your taxes. Is this true? I am terrified because I have a mission trip planned next month, and I can't bear the thought of not being able to go. Please help me understand what I'm facing and what I can do. I feel like I'm drowning in worry and shame.”

Karen, that is a truly great question. It’s something many people deal with. There are a lot of people out there who owe taxes, and they're always wondering, "What can the IRS really do?" We're talking about balancing your financial obligations with your calling to serve, and I've got some solid advice for you today, so make sure you listen.

As with anything, Karen, let's start with some scripture. I found a verse that directly addresses your issue. It comes from the book of Romans—one of my favorite books of the Bible—and this one’s chapter 13, verse 7. Here’s what it says: “Give to everyone what you owe them: if you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.” Well, that’s pretty straightforward, and I think it really addresses your question.

The truth is, as Christians, we’ve got to fulfill our financial obligations, and that means we’ve got to pay our bills. I know a lot of people don't like to hear this, but you’ve got to pay your taxes. I get it—it’s challenging. It's hard. Sometimes it's easy to get behind, and it’s tough to balance that spiritual calling with the financial and economic realities.

So, let’s get to Karen's question head-on. Karen, the question you've asked is: “Is it true that you can lose your passport if you don’t pay your taxes?” And my short answer is yes, that’s true. But look, I don't want you to panic just yet, because there's more to the story. As with anything, there's always more to the story. Here’s the deal: if the IRS has gotten to the point where they’re taking away your passport, it’s serious. But here’s the best part—it can be resolved.

Let me tell you about a client of mine I had a few years ago. His name was John. John had fallen on hard times, and he built up years and years of unpaid taxes. Yes, he filed his taxes—he was always very straight with me. When he came to me, he said, “Ralph, I filed my taxes, but I just didn’t pay them.” Unfortunately, this went on year after year, and it created a huge embarrassment for him. Guess what? John was an elder in his church, and all of a sudden, he was planning to lead a mission trip to South America.

Just a few weeks before this trip, he gets an IRS notice in the mail. He opens it up, and they’ve been after him, trying to get him to pay his taxes. They’d sent him letters, levy notices, and lien notices. But this time, the letter said, “John, we’re going to revoke your passport.” He was devastated. His dirty little secret was going to come to light. As I said, he was devastated and embarrassed. At that moment, he felt like he was letting down his church, his mission team, and, more importantly, he felt like he was letting down God.

John had reached this point of what I call a financial and faith crossroad. He came to me, in tears, and said, “Ralph, I want to know what I can do to fix this.” Well, let's look at the big picture before we talk about the specifics. The absolute truth is, the IRS has significant power. They can do some pretty terrible things—that’s just the truth. If you don’t pay them, there’s a ton of things they can do.

They can place liens on your property, meaning you can't sell your property unless you satisfy those liens. They can garnish your wages. In other words, they can contact your employer and say, “Hey employer, before you pay Sally, pay us first.” That’s what we call garnishing your wages. They can levy your bank accounts, and yes, they can revoke your passport if you don’t pay your taxes. They absolutely can revoke your passport. And here’s the bottom line: it’s not complicated. They want to get paid.

These things aren’t just inconveniences. These things—liens, garnishments, levies on your bank account, and revoking your passport—can derail your life plans. And think about this: in John's case, it was directly going to impact his ability to serve the Kingdom. He wanted to do this mission trip. He said to me, “Ralph, this is so important. I've always wanted to do this. I'm an elder in my church. How could I let myself get into this situation?”

So you're going to ask, Ralph, what did you do for John? Well, the first thing we did—and this is a Christian show, and I think this is important—we started by praying for guidance. As an elder of the church, John needed to look to God for guidance. The second thing he did was he came and met with me.

He took the first step to find expert assistance. He realized that he couldn't do this on his own. He had filed his returns, but he kept getting farther and farther behind. He would get those IRS notices. They went in the drawer. He figured if he put them under the bushel basket, they would just go away. So the first thing I did was review his entire situation. And it was bad.

He had filed his taxes, which was good, but he hadn't paid them. And the problem was just getting worse year after year. When I think about it now, he had set up some payment plans but then didn’t make the payments, and they were coming after him. They had all kinds of notices coming at him, but I guess it was the passport notice that finally rattled his cage. So after I looked at him, you know, looked at his options, after I discussed the entire situation with him, we looked at his options. The first thing we did was reach out to the IRS. I knew we had a short timeframe to work with; this mission trip was just a couple of weeks away. So we reached out to the IRS and, good for John, we were able to negotiate a payment plan where he would make what they call an installment agreement plan, where he's going to pay a certain amount each month. But here's the thing you need to understand, if you're listening to this right now: the IRS wants to get paid, but they also are willing to work with you.

Now, they're going to charge you penalties, they're going to charge you interest, they're going to make your life miserable, but their end goal is to get paid. So if you're willing to pay them on a monthly basis, it's a good possibility that you can get them to set up this installment agreement. So at the same time, because we knew he had this short duration, we asked for what we called a temporary hold on his passport revocation. Now listen, they did it, but these things didn’t happen overnight.

And it wasn't easy. I want to tell you right now, this is not something where you're going to turn this key and it's going to be fixed overnight. He didn’t get to this point overnight. We had to sit down, we had to crunch numbers to see what he could pay, because at the end of the day, he had several years.

I don’t remember exactly, but I want to say it was like seven or eight years' worth of taxes. If I remember a number, it was around $40,000 he owed to the IRS. So we sat down, we crunched the numbers, and we came up with what John could afford to pay. And then we started having these conversations with the IRS about what they were willing to take.

Now, in my experience, generally, they want to be paid back over 48 months, but they’re adding penalties, they’re adding interest to this because they’re like the creditor that doesn’t go away. And this whole situation was a huge test of faith for John. But the thing that was so cool to watch is he remained committed to it.

He had gotten to that point where they had rattled his cage enough, and he was finally doing what was right, both with the law. He was making it right with the IRS because he wanted to be able to take that mission trip. He didn’t want to lose his passport. He didn’t want to have his wages garnished and all those kinds of things, but more importantly, John was finally doing what was right in the eyes of God. So you might ask, "Ralph, what was the conclusion?" Well, I’m happy to say John kept his passport, and he led that mission trip. And working together with him, he had a plan for becoming compliant with the IRS, and that was a personalized plan. We built it. We looked at his particular situation, and we’ve got these, what I’ll call, sins of the past—these years that you filed but didn’t pay. And then we figured out, okay, well, why do you owe every year?

So we had to make some adjustments to that. And then we figured out, look, here’s what we’re going to do. We’re going to have these monthly payments, we’re going to have this much paid in estimated taxes. Again, it wasn’t easy, but we were able to build a personalized plan to rescue him from his situation, and it truly transformed his finances. But more importantly than that, it deepened his faith. You might be asking, "Ralph, what can we learn from John’s story?" I’m going to give you some action steps.

You know I always like to give you some things you can do. The first thing I’m going to tell you—John was not good about this number one thing—don’t ignore the problem. If you’re behind on your taxes, you’ve got to address it head-on. John learned the hard way that just ignoring those notices and letting it go year after year, month after month, didn’t get him anywhere.

It just— the IRS just ratcheted it up to the point where they were threatening to take away his freedom to be able to travel. So you’ve got to keep those things ahead. Look, if you owe them money, that’s fine. You can work out a payment plan with them. It might not be pleasant. It might mean you have to scrimp and save and cut, but that’s where we can work on a personalized plan together. The second thing, and this goes along with what I just said, is that you’ve got to communicate with the IRS. As I’ve said many times, they’re often more willing to work with you than you might think. You might think that big, bad IRS is going to come get you—they just want to get paid. The people working at the IRS are not bad people; they have a job to do.

They want to get paid, and unfortunately, they’ve got all the tools to make it happen. You know, like I said, they can attach your wages, they can lien your property, they can take away your passport. This is just the case. So don’t ignore the problem. Communicate with the IRS. And number three, just like John did, sometimes you’ve got to seek professional help. Somebody like me, a tax professional, can navigate these complexities of tax law, and we can help you negotiate with the IRS.

This is what I do. And I’ll talk a little bit later about how to schedule an appointment with me. The fourth thing you do—so what we said was, don’t ignore, communicate with the IRS, get that professional help—but the fourth thing, and I told you how we did this for John, you’ve got to create a plan to become and stay tax compliant.

It’s not as simple as just handling what I call the sins of the past. Yes, you’re going to have to set up a payment plan. When clients come and meet with me, I really look at it as three segments. We’ve got the past segment, the current segment, and the future segment. And your plan has to look at that.

So in John’s case, we had to figure out how much he could afford to pay monthly to fix the back problems. And now we had to look at what he was doing right now. What are his income sources? How come he was owing every year? We had to make some adjustments. And then the next thing, we had to look to the future so he doesn’t get himself in that situation again. Because here’s the problem: once you go into one of those installment plans, if you owe taxes in an upcoming year, they completely eliminate that installment plan. You’ve got to start from scratch. So you’ve got to think about that in terms of before, right now, and after. And number five, most importantly, I can’t stress this enough, you’ve got to remember that your financial decisions are a reflection of your faith. And I think John learned the hard way.

Like I said, he was an elder in the church, and this was such an embarrassment for him. He couldn’t believe he got himself into this problem. And it didn’t start all at once. It started with the first year, and the first year led to the second year, and the second year to the third year. And what he needed to do along that path, and this is where he really learned to build his faith, was he needed to seek God’s guidance. And he needed to do this in all his financial dealings. I think that’s the biggest lesson that John learned: have some faith, but with that faith, find people to help you, and don’t just pretend like it’s going to go away on its own. Well, let me do a little bit of a recap because I know we’ve covered a lot, and we asked a question at the beginning.

You know, can you lose your passport? And the answer is yes, you can lose your passport. But listen, it’s not automatic, and it’s not immediate. It’s not like you’re going to get this letter from the IRS that says, "Ralph, tomorrow we’re going to take away your passport." That just doesn’t happen like that.

You are aware that there’s a situation. You are aware that they’ve been sending you letters. That’s the thing I’ve got to say about the IRS for the most part: there’s no unusual or mysterious thing that happens. They’ve been sending letters. They’ve been notifying you. They’ve been threatening you with, you know, their intent-to-levy notices. You’re going to know what you owe. You’re going to receive those notices.

You’ve been warned. Now, typically, the truth is, I did a little research—they usually only revoke your passport once you owe over $55,000 in tax. But in John’s case, he had year after year of not paying it. And so the thing is, here’s my takeaway from this: don’t wait and let it fester like an infection.

That’s what John did—it became an infection. And once that infection took hold, it was taking over his entire financial life. So what do I tell you to do? I tell you right now, take action now. Avoid these dire consequences. You don’t need these. And maybe you’re feeling overwhelmed by your current situation. Maybe you’ve got those unpaid taxes. Maybe the IRS has already levied you.

Maybe they’ve filed liens against your property. Maybe you’ve got a wage garnishment. And here’s the thing that John learned: you don’t have to face that alone. I’m here to help you. I can help you find financial freedom. I can help you break free of the bondage of debt or, in this case, tax debt. And at the same time, align that with your Christian values. Maybe you’re feeling stuck. You’re watching your dream slip away.

You want to do that mission trip, but you’re so afraid that you’re not going to be able to get to the airport and they run your passport, and they’re like, "Your passport’s been revoked, sir." Can you imagine the embarrassment with that? Maybe you’re struggling with financial instability. You’re living paycheck to paycheck. You’re feeling frustrated, you’re feeling hopeless. Maybe you’re a small business owner.

You’re trying to balance your personal finances with your business needs, but you just can’t make it work each month. Maybe you feel like you’re taking one step forward, but you get slammed two steps back. But here’s the best part of the message today: there is hope. You can break free from this. You can achieve long-term success. It all starts with booking a call with me.

Just go to askralph.com. When you get there, you’ll see a banner ad that says "Book a Call with Ralph." Click on that, fill in the information, and we’ll work together. We’ll create a personalized plan. Because here’s the thing, I know it—just like John, your situation is unique. Your goals are different than everyone else’s.

I don’t do some cookie-cutter approach of "fill this paper out and all your problems go away." There’s no one-size-fits-all thing. You can’t go watch a YouTube video or a TikTok video or read something. I want to put together what I call a true financial roadmap for you. So don’t let another day go by feeling stuck or overwhelmed.

Let’s create a plan. Let’s set a path to financial freedom. And let’s work on your spiritual growth. Now, tomorrow we’re going to be exploring another topic for many of you, and that is: what are the top nine reasons why small businesses fail? Now, if you’re an entrepreneur thinking about starting a business, that’s one you don’t want to miss. And remember, my passion, and I know you hear it today, is to help you achieve financial success.

I want you to live out your dreams. I want you to grow in your faith. And I know, working together, we can master your finances from that Christian perspective. Don’t be like John—reach out and get the help before it snowballs into something that’s just hard to manage. So, as I always end the show, I want to encourage you to stay financially savvy, and God bless you.

Narrator
00:17:44

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