Delinquent Taxpayer’s May Lose Passports


The Senate passed the surface transportation bill with an amendment that would give the State Dept the right to deny, limit or revoke passports of “seriously delinquent” U.S. taxpayer’s. The passport provision is part of the Fight Offshore Tax Abuses, amendment offered by Senator Carl Levin. The Bill now moves to the House.

The Bill defines “seriously delinquent” as taxpayers who owe a federal tax debt for which a lien or levy may be filed. This would apply to a variety of taxpayer’s including those who default on installment agreements, including those who may default on payments under the Offshore Voluntary Disclosure Initiative (OVDI or OVDP). The timing of the Bill is also of interest, in that offshore banks are beginning to advise U.S. account holders of their obligations to report the accounts by filing Reports of Foreign Bank Accounts (FBAR’s) and report income earned on the accounts for income tax purposes. Most foreign banks will ultimately report U.S. depositor account information to IRS. The IRS will then be able to assess tax, interest and penalties on the unreported income and begin lien and levy action. The Bill if passed by the House and signed by the President would also enable the IRS to request revocation of or limitations on a U.S. taxpayer’s passport.
While the future of the Bill is in the hands of the House, the pressure against offshore tax avoidance continues to mount. For most taxpayer’s that meet the criteria, coming forward now is still a better choice than waiting for the IRS to come knocking. For some, this move will evoke thoughts of expatriation. In either case the “tax man cometh”


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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