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Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

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Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#21

Post by Godel_unicode »

kybernetikos wrote: post #13
rosser wrote: post #6

Another (non-paywalled) article [0] on this says they're only denying/not renewing passports for people with at least $51,000 in tax debt. As such, this isn't exactly "picking on the little guy", and should probably be considered in that light. If you have an outstanding tax bill on the order of 1.5x (or more ) than the median per capita income — if you owe more in taxes than most people make — that's kinda on you, a…

America is one of I believe only 2 countries that demand tax on income from its citizens who live and earn abroad (and who have almost certainly already paid tax on that income to the country in which they are living). My understanding is that they won't always even accept a renunciation of citizenship if they believe you're doing it to avoid paying them taxes. It's no surprise to me that there are significant number…

You're aware that foreign tax can be taken as a credit or deduction, yes? Further not only are you incorrect about the whole "won't accept" thing, they have a whole process for exactly how you do it. Importantly, that process only applies to well-off expats (multiple years at $150k+ or >$2m in net worth) and anyone else who wants out can get out quickly and cheaply. This whole flap isn't about"can't pay", it's about "don't want to".

https://www.irs.gov/individuals/international-taxpayers/fore...

https://www.irs.gov/individuals/international-taxpayers/expa...

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#22

Post by firic »

mdorazio wrote: post #17
kybernetikos wrote: post #13

Earlier quoted context omitted.

America is one of I believe only 2 countries that demand tax on income from its citizens who live and earn abroad (and who have almost certainly already paid tax on that income to the country in which they are living). My understanding is that they won't always even accept a renunciation of citizenship if they believe you're doing it to avoid paying them taxes. It's no surprise to me that there are significant number…

And? If you're that invested in another country, give up your US passport and get one with the new country. Alternatively, work to get the tax laws in the US changed. It's not like this stuff is a secret - if you want to work abroad you're going to get double taxed. Not paying the US portion of taxes is illegal. I don't understand the issue here, maybe you can explain it to me?

It is not that simple to renounce US citizenship. As op wrote, if they think that you are renouncing because of taxes, they will flat out deny your request. Furthermore, changing tax law for an expat is virtually impossible because it is very hard to vote from abroad, and expats are very diverse so no one politician would care to represent them.

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#23

Post by ant6n »

mdorazio wrote: post #17
kybernetikos wrote: post #13

Earlier quoted context omitted.

America is one of I believe only 2 countries that demand tax on income from its citizens who live and earn abroad (and who have almost certainly already paid tax on that income to the country in which they are living). My understanding is that they won't always even accept a renunciation of citizenship if they believe you're doing it to avoid paying them taxes. It's no surprise to me that there are significant number…

And? If you're that invested in another country, give up your US passport and get one with the new country. Alternatively, work to get the tax laws in the US changed. It's not like this stuff is a secret - if you want to work abroad you're going to get double taxed. Not paying the US portion of taxes is illegal. I don't understand the issue here, maybe you can explain it to me?

Complaining about laws/rules is 'working towards getting them changed'.

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#26

Post by duxup »

mankash666 wrote: post #10

I've had 2 instances where the IRS erroneously concluded that I owe them large tax bills. It took a few months of back and forth paperwork and phone calls to resolve, and have the IRS note on paper that I owe them nothing. With this law, an erroneous IRS decision can limit passport issuance and international travel. Three letter agencies are probably salivating at the prospect of 'errors' in possible suspects. This j…

I've had a couple run ins with the IRS as well where they thought I retired (nope) or did something I didn't do.

It was pretty easy to resolve by paper for me, couple letters back and forth, but yeah it takes a while. Fortunately the IRS was good about it all.

I wonder though if they're still investigating (sending me letters and I am responding) if it counts as owing them as far as this law goes?

From what I remember from he letters provided by the IRS, if I'm responding with legit responses (I sent them the not correct paperwork a few times and they were still ok with that) they consider the matter in one phase, but if I'm not it goes to another phase. It would make sense (hopefully the law does) that provided I'm responding and the IRS is cool with my responses that I'm not subject to the law.... but if I'm not responding then maybe the law takes effect?

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#27

Post by duxup »

ci5er wrote: post #16
freehunter wrote: post #11

Earlier quoted context omitted.

I'm not sure I see how. Seems like a great incentive, actually. Your passport is about to expire, but you're not going to get a new one unless you settle your debts. I doubt people with more than $50k in tax debt are the kind of people who can't come up with the money, they're just the people who don't want to.

If you live and work overseas, the IRS commonly miscalculates money owed. This can leave one stranded through no fault of their own and/or seriously interrupt a career. This law doesn't only sweep up tax evaders...

Not a huge chance of that occurring though. Not that many people do that and have the appropriate tax issue for 51k or more...

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#29

Post by ci5er »

mdorazio wrote: post #18
ci5er wrote: post #16

Earlier quoted context omitted.

If you live and work overseas, the IRS commonly miscalculates money owed. This can leave one stranded through no fault of their own and/or seriously interrupt a career. This law doesn't only sweep up tax evaders...

How much are you making that a miscalculation leads to an erroneous $51,000 tax bill beyond what you supposedly already paid?

About $120K~$150K depending on the host country and their particular income tax scheme. Which is not a crap salary, but it's certainly not over the moon Fortune 500 executive comp either. ($50K is about 1/3 of $150K, which is about what a W2 employee would pay - 1099 folks would pay a bit more)

There's supposed to be a deduction applied to income taxes paid to your host country - up to a cap. There are two intersecting curves related to host-country taxes paid and US income taxes owed minus the exempted part, which I'm not going to describe here, but through key-entry error or whatever bureaucratic things that happen in paper-processing-office, it is not uncommon to get a bill on a year for about that amount. IF their response to your filing in a year (say 2012) gets lost in the mail and IF the same thing happens the following year - you can owe $100K (on paper - even though mistaken), and not even know it.

Re: Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes

#30

Post by ci5er »

duxup wrote: post #27
ci5er wrote: post #16

Earlier quoted context omitted.

If you live and work overseas, the IRS commonly miscalculates money owed. This can leave one stranded through no fault of their own and/or seriously interrupt a career. This law doesn't only sweep up tax evaders...

Not a huge chance of that occurring though. Not that many people do that and have the appropriate tax issue for 51k or more...

Of the two or three dozen Americans I have met working overseas for an extended period over the last 25-or-so years, I don't think I know of one that hasn't had it happen at least once... Most end up hiring KPMG (or some such firm -- which is not cheap) to end up doing the filings and follow-up, just so it never (ever) falls through the cracks again...

EDIT: There are about 5M Americans working overseas. At an error rate (of this type) of about 5% (anecdotally, I'd put it certainly above 3% and usually (most years) below 10%), that's still hundreds of thousands of Americans each year who get to have their life thrown into a tailspin. It's not so simple as having the DMV mis-spell your middle-name or shipping your driver's license to the wrong address.

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