Americans Abroad with US Tax Due Risk Passport Revocation

Americans Abroad with Unpaid US Taxes Risk Passport Revocation

Americans Abroad with Unpaid US Taxes Risk Passport

For U.S. citizens who live overseas, oftentimes their connection to the United States will dim the longer they remain outside of the United States. But, especially for taxpayers who only have a U.S. passport and not a second passport, they must keep their passport valid so that they continue to travel without interruption. This is especially important in situations in which taxpayers who live abroad may have elderly parents in the United States or possibly grandchildren, etc. — which may not have been a concern when the taxpayer first moved abroad but is now our concern for them. Unfortunately, it is relatively easy for a U.S. person to have their U.S. passport revoked if they do not file their U.S. taxes. Let’s look at how taxpayers can avoid losing their passports.

Passport Revocation for Taxes Common Example

Here is a common example: David is a U.S. citizen who is currently on assignment overseas and moved from a US contract to a local contract. He was misinformed at the time he entered the local contract and was unaware that he was still required to file US taxes. Even though he earns a significant amount of income, he pays nearly 45% in foreign income taxes so if he did file his US taxes, he would have sufficient foreign tax credits to offset nearly all his US income tax liability. Unfortunately, since he has not filed any US tax returns, his US tax liability is showing nearly a half $500,000 overdue. When he tries to go in to renew his passport, it is rejected.

Can the USCIS/IRS do That?

Yes, unfortunately, courts have affirmed the United States government’s right to revoke or decline a passport or passport renewal for any U.S. taxpayer who owes a seriously delinquent tax debt. Therefore, even though the taxpayer thought he was tax compliant, the fact that he is not in compliance means that his outstanding tax liability can lead to a passport renewal denial.

What Should the Taxpayer Do?

Taxpayers must get into compliance by filing the previous year’s tax returns using one of the approved offshore disclosure programs. Since the taxpayer resides overseas and earns a significant amount of money, presumably the taxpayer will also have some foreign accounts and assets. In addition to having to file tax returns, taxpayers are also required to file various international information returns each year with the IRS on forms such as the FBAR and Form 8938. Since the taxpayer resides overseas for most of the time, he may qualify for the Streamlined Foreign Offshore Procedures in which all Title 26 offshore penalties are waived so that he does not have to worry that by filing the returns and becoming subject to FBAR, FATCA, and other IRS international penalties.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.