The IRS’s new power to revoke the passports of late taxpayers was announced during 2016 and is well on the way. US citizens who owe the IRS more than $50,000 are at risk of having their passports revoked. The IRS have confirmed that passport revocation will begin in early 2017.
Expats are particularly at risk, since although $50,000 may seem quite dear, the FATCA Form 8938- a filing requirement for many Americans abroad with assets overseas- has a hefty $10,000 penalty for failing to file and increases for continued failure to file.
The IRS will issue certification notices to the State Department of applicable, late taxpayers. At this point the taxpayer will be give 90 days to resolve erroneous certification issues, make a full payment of the debt or enter into a satisfactory payment alternative with the IRS. Once the decision to revoke an individuals passport is made, the department may choose to limit the passport only to return travel to the US.
How will this negatively affect US Expats?
Having your passport revoked for a late US tax payment can be particularly complicated for US expats, since your passport is your key identity while living abroad. This can lead to the loss of your job and home abroad.
Thankfully, most US expats do not owe money on their tax returns due to Foreign Earned Income Exclusion, Foreign Tax Credit and tax treaty provisions. However, it is more essential than ever to avoid penalties and the interest that can come from failing to file your tax return or filing incorrect forms.
For advice on your US tax return contact us now