The news surrounding the recently introduced passport revocation law has continued to create buzz in US expat news, and it hasn’t let up yet! The latest is that although the law has been in place for over 6 months, it reportedly hasn’t been enforced yet when it comes to penalizing those with debt caused by late US expatriate taxes.
What Is the Passport Revocation Law?
Back in December 2015, Congress passed a law that allows the US State Department to revoke or deny passports issued to US citizens who have more than $50,000 of IRS debt because of late US expatriate taxes. The law went into effect on January 1, 2016, and supposedly also applies to those individuals with existing debt. The effect of this law being put in place is intended to raise approximately $398 million over a ten-year period.
If you have $50,000 in Federal income tax debt, the IRS will issue a notice to the State Department, who will then revoke or deny your US passport. This amount of debt is considered to be seriously delinquent tax debt, but as an American living abroad, can add up pretty quickly because of interest and penalties on failure to file or delinquent filing of expatriate taxes.
The Latest Updates on the Passport Revocation Law
Recent reports are surfacing stating that despite the law going into effect on January 1, there hasn’t been a single report of the law being enforced yet. This is likely due to the fact that the IRS and State Department are still in the process of writing the regulations detailing this law – and they aren’t expected to be completed until November or later.
For US expats who may find themselves owing back taxes, this is good news – for now. This delay could give expats the opportunity to utilize the Streamlined Filing Procedures or the Offshore Voluntary Disclosure Program to catch up without serious penalties.
Why Expats Should Take This Law Seriously
As a US expat, your passport is essential. It’s the key to your identity – allowing you to conduct international and domestic travel, get a work visa or residency visa, make banking transactions and much more. Losing your passport is a big deal and could lead to more than just being unable to travel – it could cost you your job and your home!
Generally speaking, most US expats don’t end up owing money on their US expatriate taxes, because of tax breaks like the Foreign Earned Income Exclusion and the Foreign Tax Credit. However, there are ways to rack up interest and penalties for not filing your tax returns or filing the wrong forms – and these can add up! Thus, it’s critical to be sure you’re filing your expatriate taxes on time as well as reporting all income and assets accurately on the appropriate tax forms. With the stringent requirements in place for FATCA and FBAR reporting, it’s critical to stay in the loop regarding what you need to report when it comes to your foreign finances.
The Bottom Line
While the passport revocation law may not be actively enforced yet, it’s important to be aware of the fact that it can be at any time. If you know you are delinquent on your US tax obligation and aren’t sure exactly how much you owe, it’s a good time to figure it out so you can begin chipping away at the debt.
Also, don’t miss out on your chance to utilize one of the programs the IRS offers for catching up (Streamlined Filing Procedures or Offshore Voluntary Disclosure Program) if you’re able to!
Need to Catch Up On Your US Expatriate Taxes?
Greenback can help. Our team of expat-expert CPAs and IRS Enrolled Agents has particular expertise in helping US expats get caught up on their US taxes – so get started with us today!