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Old 13.12.2015, 18:23
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US Congress wants to tie passport to IRS fines

According to an article in the Swiss French business newspaper (l'Agefi) on December 4th, it seems that Congress is trying to tie the provision of / renewal of / confiscation of an American passport to outstanding back taxes, fines, follow up costs, inflation adjustments etc. on any amounts that total $US 50'000 or more.

Believe it or not, the provision is being slipped into the Highway Funding Bill that is under final discussion and vote for application January 2016. It is in Title XXXII, section 32101 "revocation or denial of passport in case of certain unpaid taxes".

The American Citizens Abroad (ACA) wrote to Congress early November to ask them not to include it but the two chambers have already agreed it but there is still a final vote that must take place before the act (and this section) becomes law.

I can't link the original article as it is behind a paywall.

Don't you Americans (all 7 million of you abroad) love how Congress is helping you.
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Old 13.12.2015, 18:36
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Re: US Congress wants to tie passport to IRS fines

It's part of the ongoing effort by the US government to criminalize Americans who live outside of the US, and just another reason for US citizens abroad to take out their host country's citizenship or any other citizenship they are eligible for.
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Old 13.12.2015, 19:19
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Re: US Congress wants to tie passport to IRS fines

I should add that the article states that you will need a Social Security number to apply for / renew a passport. This is how they will do the tax link.
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Old 13.12.2015, 19:40
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Re: US Congress wants to tie passport to IRS fines

It's great that the IRS is teaming up with the State Department. Both seem to have their hands full with errant employees. This was in the NY Daily News last week:

"Ex-State Department worker pleads guilty to stealing explicit photos, blackmailing young women BY Denis Slattery
NEW YORK DAILY NEWS
Wednesday, December 9, 2015, 5:46 PM

Michael Ford, an Atlanta native who worked at the U.S. Embassy in London (pictured), pleaded guilty to nine counts of cyberstalking, seven counts of computer hacking to extort and one count of wire fraud.

A former U.S. State Department employee admitted Wednesday to an elaborate international sextortionist scheme in which he stole sexually explicit photos from young women and attempted to blackmail them.
Michael Ford, an Atlanta native who worked at the U.S. Embassy in London, pleaded guilty to nine counts of cyberstalking, seven counts of computer hacking to extort and one count of wire fraud.
Ford targeted young women, some of whom were students at U.S. colleges and universities, with a particular focus on members of sororities and aspiring models, according to the Department of Justice.
The perverted predator used his work computer between January 2013 and May 2015 to send thousands of fraudulent “phishing” emails to potential victims, hacking into at least 450 accounts, and forwarded around 1,300 stolen email messages containing thousands of sexually explicit photographs to his own account, the DOJ said in a statement.
Ford sent threatening and “sextortionate” online communications to at least 75 victims."
http://www.nydailynews.com/news/crim...icle-1.2460666
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Old 13.12.2015, 19:54
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Re: US Congress wants to tie passport to IRS fines

This idea has been bandied about for some time so not particularly new. And FATCA was snuck through the same way, tagging it in to the HIRE Act.

https://en.wikipedia.org/wiki/Hiring...Employment_Act

Here's a CNN article on the tax/passport issue.

http://money.cnn.com/2015/11/20/pf/t...axes-passport/

And - you may need your passport to fly domestically soon too.

http://money.cnn.com/2015/10/14/tech...ex.html?iid=EL

Question is - if these states don't get their acts together will people living there be denied a passport because they're not up to date with their taxes and so not be able to fly domestically?

Of course the best thing to be is an IRS employee.

http://freebeacon.com/issues/irs-emp...-with-bonuses/
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Old 13.12.2015, 20:03
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Re: US Congress wants to tie passport to IRS fines

I'm having a hard time trying to figure out what is wrong with this.

Although I dislike the filing and paying of my taxes, it's something that I just do. If somebody thinks that they don't need to pay their taxes, I think this is a perfect deterrent to get them in line. What am I missing?
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Old 13.12.2015, 20:18
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Re: US Congress wants to tie passport to IRS fines

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I'm having a hard time trying to figure out what is wrong with this.

Although I dislike the filing and paying of my taxes, it's something that I just do. If somebody thinks that they don't need to pay their taxes, I think this is a perfect deterrent to get them in line. What am I missing?
American Citizens Abroad (ACA) wrote in a letter to Congress that the law was "far too draconian" and had an especially harsh impact on Americans living abroad since they need their passports for ordinary daily business.

The ACA also wrote that it is impractical for Americans living abroad who have fallen behind in paying their US taxes to reach a "work out" agreement with the IRS since the IRS no longer maintains offices abroad. To quote the letter: "The ability of revenue officers in Collections to meet with taxpayers outside of the US, as a practical matter, is nonexistent."

So, the State Department revokes the US passport of American living abroad for non-payment of taxes. The IRS schedules an appointment in the US for the delinquent overseas taxpayer to discuss the matter and to agree on a "work out". However, the taxpayer can't travel to the US because his US passport has been revoked.

https://americansabroad.org/files/95...-passports.pdf
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Old 13.12.2015, 20:40
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Re: US Congress wants to tie passport to IRS fines

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I'm having a hard time trying to figure out what is wrong with this.

Although I dislike the filing and paying of my taxes, it's something that I just do. If somebody thinks that they don't need to pay their taxes, I think this is a perfect deterrent to get them in line. What am I missing?
Um, why should the 7 million Americans who live abroad be penalised and the 320 million who live at home not? I can guarantee there'll be more homelanders who haven't paid their taxes than Americans living abroad. So what penalty will be inflicted on them for not paying, apart from the usual penalties/fines, etc? Yet another case of discrimination just because you happen to live outside of the US.
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Old 14.12.2015, 12:05
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Re: US Congress wants to tie passport to IRS fines

A Wall Street Journal blog today summarizes the two key provisions of the new US law allowing the State Department to revoke US passports. These two provisions are:

1. "Under the first tax provision of the FAST Act, the U.S. Secretary of State is now permitted by law to deny a passport (or renewal of a passport) and is empowered to revoke the passport of any taxpayer identified by the IRS as seriously delinquent. A seriously delinquent tax debt includes any outstanding debt for federal taxes in excess of $50,000 (indexed each year for inflation), including interest and penalties.

2. Under the second provision, the State Department is authorized to deny an application for a passport if the applicant fails to provide a social security number or provides an incorrect or invalid social security number. The passport can be denied or revoked if the incorrect or invalid number is provided willfully, intentionally, recklessly or negligently."

The article goes on to quote a Geneva attorney:
"Here’s the view of Charles M. Bruce, an American lawyer with Bonnard Lawson in Lausanne, Switzerland, who advises American Citizens Abroad, an expat group: “The revocation or denial of passport provision in this bill is exactly the kind of tax legislation that drives Americans overseas crazy. It’s attached to a huge bill mainly dealing with a subject totally unrelated to the one affecting them. There were never any hearings at which they could present their views. No one seems to know who pushed for this legislation.”

He added, “No one seemed willing to take into account the fact that communications from the IRS to taxpayers living abroad sometimes go astray. Also, the ability for these taxpayers to resolve a collections matter, which has never been easy, has been made harder by the closure of IRS foreign offices.” "

The Obama administration and Congress seem to hate Americans abroad as much as ISIS.

http://blogs.wsj.com/expat/2015/12/1...ing-passports/
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Old 14.12.2015, 18:14
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Re: US Congress wants to tie passport to IRS fines

In USSR having a passport and being able to leave the country was an enormous privilege.

UDHR
Article 13.


(1) Everyone has the right to freedom of movement and residence within the borders of each state.
(2) Everyone has the right to leave any country, including his own, and to return to his country.

However, I went through all the articles of the declaration and very little of them seem to have relevance in this day and age.
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Old 14.12.2015, 18:37
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Re: US Congress wants to tie passport to IRS fines

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I'm having a hard time trying to figure out what is wrong with this.

Although I dislike the filing and paying of my taxes, it's something that I just do. If somebody thinks that they don't need to pay their taxes, I think this is a perfect deterrent to get them in line. What am I missing?
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Um, why should the 7 million Americans who live abroad be penalised and the 320 million who live at home not? I can guarantee there'll be more homelanders who haven't paid their taxes than Americans living abroad. So what penalty will be inflicted on them for not paying, apart from the usual penalties/fines, etc? Yet another case of discrimination just because you happen to live outside of the US.
I never thought I'd see the day when I said - I agree with Congress/the IRS. And in fact, I only partially agree. I agree with the sentiment of tying tax compliance to benefits available (as Patxi hinted), but I disagree with linking this to the passport/citizenship. I know it's wishful thinking, but I do wish the US would finally repeal this hideous citizenship-based taxation.

I would link tax compliance to something like credit report/credit history, for US persons (citizen or not) who actually reside in the USA. You think that paying taxes is beneath you? You get a bad stain on your credit report. I wish they introduced something like that in my country too, for residents.
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Old 14.12.2015, 20:31
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Re: US Congress wants to tie passport to IRS fines

I know how to bring about equality! If homelanders are behind in their tax obligations then they shouldn't be allowed to use State ID's or passports to be able to fly domestically. Fair's fair.

And by my rough and admittedly poor arithmetic, last heard (Sept 2013) 8.7% of Americans were behind in their obligations so I make that 27 million+ out of 320 mil - over 3 times the number of Americans abroad.
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Old 15.12.2015, 11:06
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Re: US Congress wants to tie passport to IRS fines

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Although I dislike the filing and paying of my taxes, it's something that I just do. If somebody thinks that they don't need to pay their taxes, I think this is a perfect deterrent to get them in line. What am I missing?
The freedom to choose what society you wish to live in, benefit from and contribute to and not to one you no longer live in and benefit from.
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I know how to bring about equality! If homelanders are behind in their tax obligations then they shouldn't be allowed to use State ID's or passports to be able to fly domestically. Fair's fair.
If US State ID's and passports are free, I agree with you. Are they?
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Old 26.12.2015, 17:37
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Re: US Congress wants to tie passport to IRS fines

This is what we know:

Starting Jan. 1, the IRS may (but is not required to) report tax, interest and tax and reporting penalty debtors to the State Department (leading to a bar on passport issuance or renewal, and likely cancellation of an existing passport or passport card) when their debts total $50,000 or more and no repayment plan has been undertaken. There has been no discussion of the impact on an "enhanced driving license" available to residents of a number of border states and which serve the function of passport cards.

To do this, IRS must have recorded a lien or levy. For the difference between the two, see here: https://duckduckgo.com/?q=lien%20and%20levy

The IRS can also seek a writ "ne exat republica" and can put tax debtors and suspected tax criminals into the TECS database to be referred to enforcement officers upon any arrival at a US port of entry. This may (in the case of an alleged tax crime) involve a sealed indictment. http://www.forbes.com/sites/jayadkis...eat-republica/

Neither a lien nor levy nor tax or non-reporting penalties (such as FBAR, Form 3520, Form 5471 errors and failures) can be discharged in bankruptcy. http://taylorlaw.com/wp-content/uplo...-March2014.pdf Although there are exceptions to time bars (statutes of limitations may be tolled) upon absconding abroad, it seems to be IRS practice -- notably in "quiet disclosure" and present compliance but past FBAR nonfiling -- that the IRS does not attempt to pursue or penalize cases older than six years.

The IRS will not take action abroad that would lead a foreign court to make a judgment as to a taxpayer's status (i.e. nationality) or the validity or discharge of a tax debt or penalty. Some US taxpayers have filed bankruptcy abroad in those (mainly Anglo-Saxon and Scandinavian) countries that have consumer bankruptcy provisions, and some tax debts might have been discharged abroad in commercial bankruptcies (provided for under the laws of most countries). Such a discharge would be valid in the jurisdiction where pronounced but not in the USA. Thus liens and levies may not have effect abroad except on property located in the USA.

Tax debts are never subject to a time bar if no return, or a false or fraudulent or grossly understated return, was filed. (On the other hand, unless information has been reported to the IRS by a foreign bank under FATCA or by a foreign tax authority upon specific competent authority request, the IRS may not know and unless the tax loss is great would not normally care to pursue a case.)

Enformcement is far more likely in cases of US residents and highly unlikely in cases of foreign residents who have no assets, income or heirs in the USA (the latter on the basis of "transferee liability" for tax. (Swiss law, following ECtHR judgments, can not apply penalties to the heirs of a noncompliant taxpayer. Arguably this could impact cooperation with foreign tax authorities in such matters by European countries that have mutual collection of tax debt clauses in their US tax treaties. Six such clauses now exist, but only the one with Canada is operative. A revised model clause is bieng proposed for future treaty protocols and revisions.)

How mutual (or reciprocal) tax-debt collection will work, assuming that the clauses (like the Canadian Protocol) excludes "taxpayers" who were citiens of the requesated country at the time the tax accrued, remains to be seen. In particular one would like to know whether persons exercising EU/EEA/Swiss Treaty rights of free movement and establishment will be treated equally as citizens. Bear in mind that (for example) an Irish citizen is (under the Ireland Act 1949 and the Good Friday Agreemenet) never to be deemed an alien in the United Kingdom.

For the moment, dual-national tax debtors with non-US passports who do not visit the USA are largely unaffected by the new law. The USA has proposed revisions to extradition treaties to include tax crimes and to make such provisions not subject to "double criminality" rules (i.e. that the act charged is a crime in both countries). The current regime is discussed here: http://digitalcommons.lmu.edu/ilr/vol25/iss3/9/ For the present, tax evasion leads to deportation and/or extradition only (or mainly) where it involves common-law fraud, money laundering and other crimes outside what is called the Lord Mansfield dictum. Most of the extradition cases involve VAT. Marc Rich was never extradited from Switzerland (and was later pardoned by President Clinton, although that did not apply to any tax evasion charged by US state authorities). Seemingly his major risk of extradition related not to tax but to sanctions busting: specifically trading with Iran in violation of the Trading With the Enemy Act.

Persons who may have a claim to US nationality (usually because of birth abroad to one or two American-citizen parents) but whose birth has never been reported to a US consular office, and who have never availed themselves "of an attribute of US nationality" can visit the US as aliens (7 FAM 80, 9 FAM 40.2) and the IRS, even if it knew the facts, has no standing to bring an action to declare that person a US citizen subject to tax on worldwide income for that reason. This rule also applies to those who lost US nationality under law in force prior to the Terrazas and Afroyim Supreme Court cases.

PFIC rules (applicable to any foreign common-investment such as many or most private pensions, investment trusts, SICAVs and the like, but not public pensions) are so complex and such traps for the unwary that it is scarcely possible to address them in less than a complete legal treatise. Suffice to say that the cost of compliance can exceed the relevant accrual in any year. The PFIC rules are more a trade barrier (trade protection for US financial services providers) than a tax measure, but existing treaties and Congressional legislative overrides have kept foreign treaty partners from addressing the issue. It is likely that most Americans resident abroad are in violation, somehow, with the complex rules and subject to draconian penalties if (probably for other reasons) they are targeted by the US Government. https://duckduckgo.com/?q=pfic&ia=meanings

The assets of all "covered Americans" (i.e., for the most part US citizens and Green-Card holders with more than $2 million in assets) and those of his or her spouse and children -- whether or not the spouse and children are US citizens -- are at risk from this terrible morass. Again for reasons too complex to address here. Unwinding a US connection can involve "exit taxation" upon such assets, even where the assets (such as pensions and community property, and for some Indian citizens Hindu Unified Family property) are outside the control of the US person.

Hope that helps. This essay goes beyond the pure issue of passport revocation because the whole Congressional enterprise goes beyond that: it is an attack on persons who "owe [primary] allegiance" to the USA, even if they are citizen-residents of another country and even if they have never set foot in the USA: because under the principle of "American Exceptionalism", US allegiance is always primary and, in principle, permanent. And it has in common, ironically, with Sharia that the penalty for "apostasy" is draconian indeed.

An afterthought: because Switzerland taxes capital (via its wealth tax) and such tax is not creditable as a foreign tax against US federal or state income tax, there can easily be double taxation. For the same reason transactions such as sale of a main residence may be tax-free in one country but taxed just the same in the USA; and because of "legislative override" treaty provisions that might otherwise avoid taxation do not do so as to Alternative Minimum Tax or Obamacare 3.8% "Medicare contribution" tax.

Last edited by Caryl; 26.12.2015 at 18:13.
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Old 27.12.2015, 12:35
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Re: US Congress wants to tie passport to IRS fines

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Hope that helps. This essay goes beyond the pure issue of passport revocation because the whole Congressional enterprise goes beyond that: it is an attack on persons who "owe [primary] allegiance" to the USA, even if they are citizen-residents of another country and even if they have never set foot in the USA: because under the principle of "American Exceptionalism", US allegiance is always primary and, in principle, permanent. And it has in common, ironically, with Sharia that the penalty for "apostasy" is draconian indeed.
Well said. For Americans who emigrate and are moderately successful, there is practically no escaping Uncle Sam's tentacles for life. Either pay a draconian exit tax on assets accumulated (from income earned abroad) or continue to pay US income taxes for life. Then there is job market and investment discrimination abroad due to American citizenship status.

Someone with $2 million in assets is only in the top 10% of Americans, i.e., far from the fabled upper 1%. Moreover, since the $2 million asset threshold is not indexed for inflation, it will become increasingly difficult for ordinary American citizen emigrants to give up their US citizenship as US dollar inflation continues.
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Old 27.12.2015, 15:22
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Re: US Congress wants to tie passport to IRS fines

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Someone with $2 million in assets is only in the top 10% of Americans, i.e., far from the fabled upper 1%.
Maybe top 15 or 20%: http://www2.ucsc.edu/whorulesamerica/power/wealth.html But because the $2 million includes personal residences and personal pensions (notwithstanding, as I said, whether early withdrawal is possible or whether a noncitizen is co-owner under foreign law) Americans in London or Toronto or Geneva or any other high-cost housing market are trapped.

In the lectures I've attended there are always some so bitter at the United States that they have cut off all ties. They hope and expect their other country of nationality to treat them (as International Law allows) as if they held only that other nationality.

Which is why they find FATCA and their effective exclusion from banking in some countries so infuriating. Some Canadian banks (and doubtless banks elsewhere) have demanded CLNs even for those who lost nationality under pre-1980 law and for whom an application for CLN would be "exercise of an attribute of American citizenship" opening up a can of worms: https://groups.google.com/forum/#!to...rs/4jWlJxqSz7Y (Rev. Rul. 75-357).

The professional community that has self-identified as experts in these matters (and have become, out of profit motive, promoters of OVDP) has little incentive to encourage the diplomatic and international-law initiative needed to fight back. This site (to the extent that it addresses such issues), and the Canadian "Isaac Brock Society" are seen by the American Right (overseas Republicans excepted) as nests of self-serving ... apostates. The American Left has even less sympathy.

But as my exchange yesterday and today in an Insurance thread on this forum ( 3rd piller with Life Insurance - WATCH OUT! ) suggests: in this as in so much else, tendency is to blame the victims.

Last edited by Caryl; 27.12.2015 at 15:41.
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Old 27.12.2015, 16:08
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Re: US Congress wants to tie passport to IRS fines

I agree that it makes more sense in many (or most) cases to use household assets, which you're suggesting, rather than individual assets which I used.

A factor that should be mentioned in the $2 million asset calculation is the value of a person/ family's pension. As an example, someone who is receiving CHF 60'000 per year as a pension payment (60% of his last income of CHF 100'000) would need to determine its "asset value" when expatriating. This CHF 60'000 per year pension at age 65 would be valued in the area of CHF 1'000'000 to CHF 1'300'000. For purposes of an example, let's say it is worth half-way between at CHF 1'150'000 and that CHF 1 = US$1. Here's how quickly a family can reach the CHF 2'000'000 asset threshold:

Pension value: CHF 1'150'000
Value of house: CHF 600'000
Personal property: CHF 50'000
Car: CHF 30'000
Other savings: CHF 170'000
Total for example: CHF 2'000'000

In this example, the family's inheritable assets of just CHF 850'000 suddenly become CHF 2'000'000 for US expatriation purposes because of the inclusion of the company pension. This person is considered by the IRS to be a "covered expatriate" and the draconian exit tax due, etc.

It is understandable why so many US citizens abroad have developed a strong distaste for the overreaching US government.
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