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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

#61

Post by nradov »

duxup wrote: post #47
pembrook wrote: post #32

Have a feeling this will end up extorting American expats and people who grew up abroad without ever living or working in the US (who are only US citizens because of their parents). When FATCA was passed, it flipped a switch that automatically made tens of thousands of people around the world who have never set foot in the US into criminals by default since they'd never filed US taxes (the US has the only global taxa…

I wonder how likely it is people would renounce their citizenship.... that US passport / citizenship is pretty powerful.

During the past few years under 10,000 US citizens have renounced their citizenship per year. So basically negligible as a percentage of the population.

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

#62

Post by ci5er »

perl4ever wrote: post #57
ci5er wrote: post #30

Earlier quoted context omitted.

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…

"Most end up hiring KPMG" sounds to me a bit odd, like someone saying "My car was overdue for an inspection so I hired GM like most people". I don't have experience in this exact situation, but I asked a friend who she recommended for tax advice not long ago, and it wasn't one of the Big 4.

I agree it sounds weird. And if you stay in one country - having a local boutique with US tax experience makes more sense. If you bounce around, it's nice to have someone with presence in all the places you might end up traversing. Also, depending on who you work for, sometimes employees can get a deal dealing with their corporate's accountants.

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

#63

Post by nradov »

onetimemanytime wrote: post #43

So "John" owes over $51K to the IRS but simply doesn't have the money or assets to pay. $51k may seem like a lot but it isn't when considering many years, penalties, fees and interest. So, is he condemned for life to never travel outside USA to visit ailing mother and so on? Or just apply for humanitarian exception passport and hope?

The IRS will settle tax debts for less than the amount owed if you can prove you have few assets and a low income. They're just like any other rational debtor in that regard.

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

#64

Post by perl4ever »

BeetleB wrote: post #48
Godel_unicode wrote: post #21

Earlier quoted context omitted.

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…

A lot of the problem isn't that they owe taxes but that they have trouble filing correctly. You're required to file even if you owe no tax. The US has fairly high reporting requirements. Think of all the tax forms you've received in the US. W2. All the various 1099s. All the docs related to stocks, SPP, interest on mortgage, real estate transactions, etc. The IRS still needs all that paperwork even if you have these…

"This proves burdensome enough that a lot of expats pay thousands a year to tax firms"

It's a matter of opinion, but I don't think it's an intolerable burden if your tax prep costs are <10% of your total tax bill.

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

#65

Post by adventured »

onetimemanytime wrote: post #43

So "John" owes over $51K to the IRS but simply doesn't have the money or assets to pay. $51k may seem like a lot but it isn't when considering many years, penalties, fees and interest. So, is he condemned for life to never travel outside USA to visit ailing mother and so on? Or just apply for humanitarian exception passport and hope?

No, not condemnded to life. IRS back taxes have a ten year statute of limitations (from the point of assessment). Formally they call it the collection statute expiration date (CSED). They can't collect after that. If you owe the IRS Wesley Snipes / Willie Nelson type money, they will typically sue you in court however (which can effectively extend the ten years by generating a suspension of the countdown).

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

#66

Post by duxup »

nradov wrote: post #61
duxup wrote: post #47

Earlier quoted context omitted.

I wonder how likely it is people would renounce their citizenship.... that US passport / citizenship is pretty powerful.

During the past few years under 10,000 US citizens have renounced their citizenship per year. So basically negligible as a percentage of the population.

Yeah it gets a lot of attention but the numbers are crazy small, but on the internet there's a lot of talk about it, all the time.

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

#67

Post by perl4ever »

nradov wrote: post #63
onetimemanytime wrote: post #43

So "John" owes over $51K to the IRS but simply doesn't have the money or assets to pay. $51k may seem like a lot but it isn't when considering many years, penalties, fees and interest. So, is he condemned for life to never travel outside USA to visit ailing mother and so on? Or just apply for humanitarian exception passport and hope?

The IRS will settle tax debts for less than the amount owed if you can prove you have few assets and a low income. They're just like any other rational debtor in that regard.

The IRS doesn't even care about old tax debts in my experience. People perennially bring up the nightmare scenario (as suggested by the GP) where owing $1.99 turns in to a zillion dollars over the years. I was going through a background check a few years ago that required subjects to have paid all their debts to the government, and I found a temp job from a past tax year never sent me a W-2, so I filed an amended return to pay the $10 or whatever it was I owed. The IRS sent me back a check plus interest and a polite letter saying it was past the statute of limitations so they could not accept it.

This sort of thing tends to confirm my prejudices about those who complain all the time about the IRS as a bogeyman.

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

#68

Post by duxup »

perl4ever wrote: post #67
nradov wrote: post #63

Earlier quoted context omitted.

The IRS will settle tax debts for less than the amount owed if you can prove you have few assets and a low income. They're just like any other rational debtor in that regard.

The IRS doesn't even care about old tax debts in my experience. People perennially bring up the nightmare scenario (as suggested by the GP) where owing $1.99 turns in to a zillion dollars over the years. I was going through a background check a few years ago that required subjects to have paid all their debts to the government, and I found a temp job from a past tax year never sent me a W-2, so I filed an amended ret…

Provided you communicate with the IRS in good faith and can show them you're doing that, I've found the IRS to be pretty easy to deal with.

It is when you don't respond, straight up don't pay for years, or lie, or something that it gets ugly.

Granted everyone's mileage may vary.

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

#69

Post by perl4ever »

adventured wrote: post #65
onetimemanytime wrote: post #43

So "John" owes over $51K to the IRS but simply doesn't have the money or assets to pay. $51k may seem like a lot but it isn't when considering many years, penalties, fees and interest. So, is he condemned for life to never travel outside USA to visit ailing mother and so on? Or just apply for humanitarian exception passport and hope?

No, not condemnded to life. IRS back taxes have a ten year statute of limitations (from the point of assessment). Formally they call it the collection statute expiration date (CSED). They can't collect after that. If you owe the IRS Wesley Snipes / Willie Nelson type money, they will typically sue you in court however (which can effectively extend the ten years by generating a suspension of the countdown).

For practical purposes, less than 10 years.

Googling[1] suggests that the IRS has 3 years to audit you and ask for more money in general, and 6 years if the amount of income omitted is >25% the income you reported.

This seems eminently reasonable to me. Just don't lie to them and you don't have to live in fear of making a small mistake.

[1]https://www.thebalance.com/irs-statute-of-limitations-319294...

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