The U.S. government reportedly plans to soon enact a law allowing your passport to be revoked or denied if you owe more than $50,000 in taxes.
Starting in January, the State Department will block Americans with “seriously delinquent” tax debt from receiving new passports and will be allowed to rescind existing passports of people who fall into that category, The Wall Street Journal reported.
The Internal Revenue Service will compile a list of Americans in violation of the new rule, using a threshold of $50,000 of unpaid federal taxes, including penalties and interest, which would be adjusted for inflation, the Journal reported.
"In most cases, the passport provision would apply if a taxpayer is subject to a lien, which advises creditors of a debt to the IRS, or a levy, which gives the IRS the authority to seize assets," the Journal reported.
The penalty wouldn’t apply if a taxpayer is in the process of resolving tax debt with the IRS, or if the taxpayer is contesting the collection, or traveling for humanitarian purposes.
The rule is buried in a highway funding bill. The Joint Committee on Taxation estimates that the move would save the government $398 million over the next decade, according to the Journal report.
It’s unclear how many people would be affected, but there currently are some 7 million U.S. citizens living abroad.
“Americans abroad need their passports for many routine activities of daily life, such as banking, registering in a hotel, or registering a child for school, and mistakes could be disastrous,” Charles Bruce, an American lawyer with Bonnard Lawson in Lausanne, Switzerland, who advises American Citizens Abroad, an expatriate group, told the WSJ.
The IRS sent 855,000 notices to U.S, citizens abroad in 2014, but many notices failed to reach the intended party due to difficulty with international addresses. IRS does not allow notices via email, only USPS, and their notices may not be forwarded internationally.
“Enactment of this legislation would come at a time when the Internal Revenue Service’s ... ability to render services to taxpayers overseas, and, in effect, help them ‘work out’ their collection problems, are severely reduced,” Marylouise Serrano of the group American Citizens Abroad wrote to congressional leaders earlier this month.
The rule has been passed in similar versions by both the House of Representatives and the Senate. Congress is expected to pass it in early December.
"Critics of the measure claim there will be no judicial review and no due process if the passport revocation rule retains its current form," HNGN.com reported.
"You don't get to go in front of a judge first to have a fair and impartial hearing over whether or not the government's tax allegations are accurate. The language in the law is very clear: they can simply revoke your passport if you owe them money in their sole discretion," according to Soverign Man's Simon Black, Zero Hedge reported.
To be sure, many Americans living abroad apparently are disgusted with their homeland and are taking symbolic action.
A record 1,426 Americans gave up their citizenship in the third quarter, CNNMoney recently reported,
citing government data.
"That puts the number of Americans who have renounced their citizenship at a whopping 3,221 so far this year. In 2014, a record 3,415 Americans gave up their passports, according to government data" analyzed by CNNMoney.
"An increasing number of Americans are bidding Uncle Sam farewell. Many are expats tired of dealing with complicated tax paperwork — a headache that has increased lately as hefty tax regulations have kicked in. Last year, 15 times more Americans renounced their citizenship than in 2008," CNNMoney reported.
"Unlike most countries, the U.S. taxes citizens on all income — no matter where it's earned, or where they live. For Americans living abroad, that means a mountain of paperwork so complex that expats are often forced to seek professional help, paying high fees to accountants and lawyers."
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