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As mentioned previously here on Expatriate Healthcare, the United States is one of the few countries which demands taxes from its citizens no matter where they happen to be living and where their income has been earned.
It is one of only two countries in the world to do this and has been a constant source of anguish for some expats.
Indeed, an increasing number of Americans living overseas have opted to give up their American citizenship rather than paying what they see as unfair and excessive taxes.
Now it seems that further changes could be afoot which could, it has been claimed, result in individuals owing taxes to the IRS having their passport cancelled or renewals refused until the claimed funds have been settled.
Of course there are two sides to every story and a number of cases have come to light in recent years in which US expats have placed overseas income into private bank accounts and not declared these to the authorities. Additionally, in the past extracting taxes from those living overseas is far from easy. According to recent statistics in 2014 alone the IRS send 855,000 notices of tax owed to US citizens living abroad.
However in the past there were solutions; the IRS maintained a number of overseas offices which allowed enabled US expats to negotiate a deal and work their debt off. In recent years however a large number of these offices have closed, making it ever more difficult for expats to resolve outstanding tax issues in a timely manner.
Now non-profit organization American Citizens Abroad claims that a new bill could enable the IRS to revoke passports of those expats it believes owe considerable sums to the State.
ACA, which describes itself as “the voice of Americans overseas”, is a volunteer organization advocating for American citizens living and working abroad. A recent press release from ACA discusses the potential problem in more depth.
It is claimed that Section 32101 of the new Highway Bill contains provisions which “can be extremely harmful to Americans residing abroad”.
The ACA contends that individuals found to be “seriously delinquent” in their tax payments could find their passport being affected. While the threshold for such actions have been set at $50,000, it remains to be seen quite how this figure will be calculated. While the sum sounds considerable, when fines and interest have been removed the threshold could be hit by a considerable number of highly-paid Americans living overseas.
As the ACA point out, without their passports many expats “cannot do things like open a bank account, arrange for direct debit of utility bills, travel, or do many other everyday things”.
Only time will tell whether this new legislation does indeed become part of US law, and if so how often the new regulations will be used against US citizens. The news is clear, however; all US expats should make absolutely certain that any tax-related issues are resolved as soon as possible to avoid the risk of their passport being revoked by the US government.
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Expatriate Group & Expatriate Healthcare are trading styles of Strategic Insurance Services Limited who is authorised and regulated by the Financial Conduct Authority (FCA). FCA Firm reference Number is 307133. Strategic Insurance Services Limited is authorised to carry on Regulated Activities in accordance with the permissions granted by the FCA under PART IV of the Financial Services and Markets ACT 2000.