New US Law May Put Non Compliant Taxpayers’ Citizenship at Risk
Some Americans abroad are rushing to give up their US citizenship, while others want to hold onto their passports. In the end, no one wants to have a gut wrenching experience and be forced into a decision they don’t want to make.
However, the tax laws won’t stop changing. On Dec. 3, the US Congress overwhelmingly passed the FAST (Fixing America’s Surface Transportation) Act and on Dec. 4, President Obama signed it into law. As it stands, the law would take effect January 1, 2016 and more importantly, would be applied to those with existing debt.
Under the first tax provision of the FAST Act, the U.S. Secretary of State is now permitted by law to deny a passport (or renewal of a passport) and is empowered to revoke the passport of any taxpayer identified by the IRS as seriously delinquent.
If you currently have a past due US tax liability, you may risk having your US passport revoked as early as January 1, 2016. The FAST Act would allow the State Department to revoke or deny US passports from citizens who owe more than $50,000 to the IRS.
As part of H.R. 22 – Surface Transportation Reauthorization and Reform Act of 2015, the bill was passed by the House of Representatives and the Senate last month and may be signed into law soon. As it stands, the law would take effect January 1, 2016 and more importantly, would be applied to those with existing debt.
A list will be generated by the IRS of those facing a potential tax lien, although how many will be affected is unknown. If a taxpayer is delinquent on their tax debt, the IRS will notify the US State Department and a tax lien will be issued. It is unclear whether or not you will be notified that your passport has been affected or if you will find out at the airport.
As with most things, there will be exceptions to this new ruling depending on your tax standing. In any case, it is advised that you do not ignore any warnings or notices that you are sent by the IRS, especially if you have plans to travel abroad.
You are recommended to have your decision reviewed with a qualified tax advisor or lawyer. We have qualified US CPAs, US tax lawyers and EAs here to help you. We are a group of tax specialists who are familiar with the IRS voluntary disclosure programs and have years of experience in negotiating with the IRS. We address IRS tax notice on a daily basis. Our job is to help our client – you – to make the best decision with the minimum tax consequences by utilizing tax treaties, tax exceptions and best filing positions. The best tax results come from tax planning. Please feel free to schedule a chat with one of us today.