U.S. Citizens owing money to the IRS are at risk of having their passports revoked as of January 1, 2016. This is part of the Fixing America’s Surface Transportation Act signed into law by President Obama on December 4, 2015.
US citizens residing anywhere in the world will be affected. If a taxpayer owes $50,000 or more (including penalties and interest), the IRS will issue a certification notice to the US State Department after the tax has been assessed (for any tax year) and a notice of lien or levy has been filed in court and issued to the taxpayer. The US State Department will then revoke, deny, or limit the individuals passport. If you are already under an agreement with the IRS to pay the debt, under an installment agreement or something similar, or you have an open court case or judicial proceeding then you will not be subject to the new regulations.
Expats in Danger of Losing their Passports
Many of the roughly eight million Americans living abroad do not realize what is required to stay in compliance with US tax authorities. The IRS taxes citizens on world-wide income. FATCA, or the Foreign Account Tax Compliance Act, requires financial institutions around the world to report back to the IRS on accounts held by U.S. taxpayers.
So in all likelihood, the IRS will become aware of your assets and income at some point. FBAR’s (Report of Foreign Bank and Financial Accounts), if applicable to you, need to be filed on or before June 30th of the year immediately following the calendar year being reported. Penalties and interest for not filing FBAR’s or tax returns can quickly exceed $50,000, putting you in jeopardy of losing your passport
Are You an Expat Worried About Losing your Passport?
Passports for US Citizens living abroad can be extremely valuable. Many people require their passports to not only travel from their resident country to the US, but also to travel between other countries. Many work visas also require a valid passport.
This new law will have a tremendous affect on US expats living abroad. If you are behind in filing your tax returns or FBAR’s – or not even sure if you are obligated to do so – please contact us. Freeman Tax Law specializes in helping Expats get into compliance with the IRS. Contact us today to schedule a free, no-obligation initial consultation.