The IRS announced that in early 2017 it would begin sending the list to the State Department which taxpayers owe back taxes requiring the revocation of their passports.
According to Dictionary.com the word onerous is defined as 1. laborious or oppressive 2. law (of a contract, lease, etc) having or involving burdens or obligations that counterbalance or outweigh the advantages. A bill is currently working its way through congress that is onerous to US citizens who live or work abroad. The IRS requiring U.S. Citizens living overseas to file tax returns certainly meets the definition of onerous.
In the fall of 2012 the Orwellian bill titled “Moving Ahead for Progress in the 21st Century Act” passed. The bill has a provision that allows the United States Department of State to “deny, revoke or limit passport rights for any taxpayers with serious delinquencies”. Though the main part of the bill was meant to reauthorize funds for transportation programs, a small section introduced by Senator Barbara Boxer allows the IRS to revoke the passports of U.S. Citizens who owe back taxes.
The tax debt has to exceed 50,000 U.S. Dollars. Furthermore, the IRS will have to file a lien or assess a levy for the outstanding balance in order to suspend or revoke the passport then it can send a certification to the State Department to have a passport revoked. The bad news is that all the IRS has to do is send notices to the last known address of the taxpayer. The problems for many U.S. citizens who reside overseas is that many have not filed their U.S. tax returns for many years, so their last known address may be years or decades old.
The onerous part of the bill for US citizens who live abroad is that through the use of foreign tax credits and exclusions, most will not owe any US taxes when their returns are completed properly. However, the IRS will assume that all their income is taxable in the US until they file a return with the IRS. Thus with FATCA reporting income through international banks without those exclusions and credits, the IRS may assume that the expat owes substantial amounts of tax and move with no knowledge of the expat to revoke their passport.
If you are a U.S. Citizen who is residing overseas you need to come into compliance with your U.S. Tax obligations and your financial account disclosures. The IRS has the power to force International Financial Institutions to report the balances of all U.S. Citizen account holders. While it is possible to avoid penalties by entering certain IRS programs, once the IRS detects non compliance they will move to enforce horrendous penalties of 50 percent of the accounts balance and seize assets and yes revoke passports. By treaty they can deport U.S. citizens from Thailand to face tax fraud prosecutions.
If at any point you believe that you have undisclosed assets or you have not been completing U.S. Tax returns, contact us at James@aitaxadvisers.com for a free consultation. We can help you solve all problems you may have.
American International Tax Advisers is an IRS Authorized Efiler.