IRS Issues Warning About Passport Revocation to Those Who Are Behind on US Tax Returns
The IRS announced recently that your passport could be in jeopardy if you are behind on your US tax returns and owe taxes. This is, of course, particularly crucial for expats who often rely on passports for their livelihood as a vital part of their identification. Find out how to avoid the consequences of this troubling provision below.
Seriously Delinquent Tax Debt Is Grounds for Passport Revocation
These passport revocation procedures have been around for just over a year, but the IRS has given more information about the processes that are being followed. Essentially, if the IRS determines your tax debt to be seriously delinquent, you would receive a notification (Notice CP508C) from the IRS. At that point, you need to respond as soon as possible because the IRS will reverse the certification (so you’ll be eligible for a passport once again) but has up to 30 days to do so – an eternity for expats who use their passport as their primary form of ID. That said, the reversal process can be accelerated for expats or those with travel plans in the near future. Other exceptions to passport revocation are available for people who are deceased, bankrupt, victims of a tax-related identity theft, facing an IRS-verified hardship, or in a federally declared disaster area.
However, it’s important to note that before denying a passport renewal or new passport application, the State Department will hold your application for 90 days so that you can resolve erroneous certification issues, make full payment of the tax debt, or enter a satisfactory payment arrangement with the IRS.
Further, the threshold for seriously delinquent tax debt is a debt of over $52,000. This amount is particularly easy for expats to reach due to the severe penalties that rack up if taxes aren’t paid. For instance, one non-willful failure to file FBAR can cost up to $10,000. If your failure to file FBAR was willful, then you could face a penalty as high as $100,000 or 50% of the total values per violation.
Also, accuracy-related penalties can be up to 20% or 40% on underpayment of tax, so be sure to read up on all the latest changes to the tax code in order to avoid any errors. Or, easier yet, leave it in the hands of a specialist.
What Can Expats Do to Avoid This?
Luckily, amnesty programs are available for taxpayers who are behind on taxes. Which amnesty program is right for you depends on how far behind you are and whether or not you were aware of the tax obligations. If you weren’t aware of the requirement to file annual Federal Tax Returns, you might be able to use the Streamlined Filing Procedures to catch up penalty free.
On the other hand, if you were aware of the obligations, you will need to use the Voluntary Disclosure Program because the Offshore Voluntary Disclosure Program closed last year. And, you should do so as quickly as you can. If the IRS finds your tax delinquency, you won’t have the opportunity to use an amnesty program, and worst-case scenario, you could face criminal charges such as tax evasion, false returns, failure to file tax returns, and even attempt to defraud the government. The good news is that, if you haven’t been contacted by the IRS at this point, you can take immediate action and never have to think about these frightening outcomes.
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