U.S. citizens residing abroad may lose their passport if they owe over $50,000 to the IRS
By Nathan Savransky, CPA (US)
Congress has recently enacted a new law allowing the State Department to revoke or deny U.S. passports to delinquent taxpayers.
American citizens, including expats living abroad, who owe over $50,000 in unpaid taxes (including penalties and interest) on which a lien or a levy has been filed may see their passports revoked and at least not renewed in the near future. This law would not apply to taxpayers who are on an installment plan or if the debt is being disputed through the IRS or in tax court. There is also an exception allowing the State Department to issue a passport in emergency circumstances or for humanitarian reasons.
This law also allows the State Department to revoke or deny passports to U.S. citizens who do not have social security numbers, which is not uncommon among expats born to US parents who never lived in the U.S.
My take on this:
I believe this should be a matter of concern to every American expat, even those who have filed tax returns in the past. If you applied for the child tax credit in the last few years, the IRS may decide to adjust your tax return and impose penalties and interest in advance until you provide documentation justifying your claim. In many cases, especially when they adjust more than one year at a time, the liability could exceed $50,000.
Steps you can take to prevent the denial or revocation of your passport:
- If you receive a notice from the IRS, don’t wait. Prepare the documentation following their instructions. If you need help with a notice, feel free to contact our office and we will help you resolve it.
- Make sure the IRS has your updated address so you can receive notices and resolve them quickly. If you changed your address in recent months, you can update your address by filing form 8822 or just by filing your 2015 tax return with the updated address.
- If you are not sure whether the IRS has already imposed penalties on tax returns filed in the past, you can request transcripts from the IRS and ask them if there is any amount due by calling the international line: 1(267) 941-1000.
- If you haven’t filed tax returns in the last few years, consider whether you qualify for the IRS streamlined program which allows you to get back to compliance and have penalties removed by filing three years of tax returns and six years of FBARs.
In my next article, I will discuss the option of renouncing your U.S. citizenship, which can only be done once you can confirm that you are in compliance with your U.S. tax obligations. If you have any questions, feel free to call our Israeli office (02-6274884) or e-mail me at nathan@savranskypartners.com.
The content of this article is intended to provide general information on the subject and is not a substitute for a tax consultation.