income taxes

US expats face losing passport if they are seriously behind with tax payments

by Ray Clancy on December 4, 2015

Concerns have been raised that a new law in the United States would give the taxman the power to take away a passport from an expat if they are seriously behind with their payments.

Unlike many other countries, the US requires citizens to pay tax where ever they are located in the world and high earners have been known to avoid payments.

Tax-LawsIndeed, recent controversy has surrounded revelations that wealthy US taxpayer were hiding earnings in offshore bank accounts, most notably in countries like Switzerland.

Now, according to campaigning group American Citizens Abroad, a little noticed provision in a new Highway Bill due to become law on January would deny or revoke passports for taxpayers who are “seriously delinquent,” owing $50,000 or more.

“This provision is way too harsh and dangerous a remedy, especially for American tax payers residing abroad who absolutely must have their US passport at hand,” said Jonathan Lachowitz, chairman of American Citizens Abroad. “In many situations, they cannot do things like open a bank account, arrange for direct debit of utility bills, travel, or do many other everyday things, without their passport.”

He believes that this new rule has never been the subject of a hearing, where taxpayers affected and groups advocating for them could give testimony. Apparently, neither the Internal Revenue Service, including IRS Collections, nor the Treasury Department has pushed for the change and according to the group the State Department, including the Bureau of Consular Services, apparently was not consulted.

It’s unclear just how many Americans abroad this would affect, but a report issued in September by the Treasury Inspector General for Tax Administration found that the IRS sent 855,000 notices to US citizens abroad in 2014.

Lachowitz also pointed out that there is less advice available for American expats when it comes to calculating tax owed. For example, IRS offices overseas have been closed.

“The ability of revenue officers to meet with taxpayers outside the US, as a practical matter, is non-existent,” said Lachowitz, adding that there are well known problems with IRS communications sent to taxpayers overseas.

It is estimated that there are between six and eight million Americans living abroad. A report issued in September by the Treasury Inspector General for Tax Administration found that the IRS sent 855,000 notices to U S citizens abroad in 2014.

“Tax Bills like this one that pop up and are attached to a large Bill drive Americans living abroad crazy. In their minds, this sort of thing demonstrates that Congress doesn’t really understand the realities of their situation and, to the extent it does, doesn’t care,” said Marylouise Serrato, executive director of American Citizens Abroad. “On behalf of Americans abroad, ACA asks that the Republican and Democratic Conferees to join in striking out these provisions.”


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US expats urged to prepare for the most complicated tax return season ever

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