IRS can rescind U.S. citizens’ passports for outstanding taxes
It is not just citizens from Muslim-majority countries who are now facing a U.S. travel ban. New rules could also see American citizens soon being prohibited from international travel, by having their passports withdrawn for unpaid taxes.
The IRS has published information on its website that details the new powers to revoke American passports as a result of outstanding taxes.
At a time when President Trump condemns the judge who has blocked his controversial travel ban for people from seven Muslim-majority countries, there is now another ban coming into play, which could block U.S. citizens from travelling internationally.
Passed by Congress in 2015, this new law gives the IRS a new tool at its disposal to collect taxes.
The Internal Revenue Service can inform the State Department if people have serious tax debt, meaning they will not issue or renew a passport after receiving such a certification from the IRS. This will begin in early 2017.
This latest action would severely affect U.S. expats for two key reasons.
First, because expatriates tend to use their passports far more frequently. Not just for travel, but for admin purposes such as rental or employment contracts in their countries of residence.
Second, as a direct result of the Foreign Account Tax Compliance Act, or FATCA, which was launched in 2014, tax returns are now far more complicated and time-consuming for Americans residing overseas, due to extra reporting requirements.
Indeed, in our experience of working with U.S. expat clients, 35 per cent are now more likely to make an error on their tax return and/or file late because of the complications surrounding FATCA.
As such, for American expats, this latest string to the IRS’ bow to collect taxes means it’s more crucial than ever to file on time and do so correctly.
It’s recommended that before submitting their tax returns, they get them checked over by a financial adviser with the necessary cross-border expertise.
Earlier this week, I launched the Washington-based Campaign to Repeal FATCA, and with co-leader, Jim Jatras, a leading authority on FATCA, we’re assembling a team of experienced DC professionals to push the repeal effort over the top. Full details here.