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NOTICE TOFINANCE
AMERICAN TRAVELERS
by Michael Wiener, E.A.
C ongress passed FATCA a few years back. It was aimed at
reaching money of tax evaders hidden offshore, as a result is
nearly impossible for U.S. persons to hold or open bank or
brokerage accounts outside of the U.S. That is,for a tax policy objective, a proposed tax bill administratively with the IRS or in court,
the freedom enjoyed by U.S. persons to hold
their liquid assets wherever they want in the
world has been substantially curtailed. The
construction of Gulag America under the
guise of tax policy continues apace with the
passage and signing of the Fixing America’s
Surface Transportation (FAST) Act. The
Act adds new Section 7345 to the Internal
Revenue Code. This provision provides that
if the IRS Commissioner certifies that a
taxpayer is delinquent in his her federal taxes to the tune of $50,000
or more, the Secretary of State can take action to deny, revoke or
limit the taxpayer’s passport. That is, persons with delinquent taxes
may now be barred from leaving the U.S. The U.S. has enforced its
taxes for over one hundred years with civil and criminal enforcement
mechanisms. Apparently, that enforcement arsenal is no longer
sufficient, and U.S. citizens in financial straits will now lose their
travel “privileges."
IRS POWER TO REVOKE PASSPORTS SIGNED INTO LAW
The passport provision is now official, as President Obama
signed the 5-year infrastructure spending Bill. It adds a new section
7345 to the Internal Revenue Code. It is part of H.R. 22 – Fixing
America’s Surface Transportation Act, the “FAST Act.” Why are
passport covered in the tax code, you might ask? The title of the new
section is “Revocation or Denial of Passport in Case of Certain Tax
Delinquencies.” The idea goes back to 2012, when the Government
Accountability Office reported on the potential for using the issuance
of passports to collect taxes. It was controversial then, but this time
sailed through, slipped into the massive highway funding bill. The
section on passports begins on page 1,113. The law says the State
Department can revoke, deny or limit passports for anyone the IRS
certifies as having a seriously delinquent tax debt in an amount in
excess of $50,000. Administrative details are scant. It could mean
no new passport and no renewal. It could even mean the State
Department will rescind existing passports. The State Department
will evidently act when the IRS tells them, and that upsets some
people. We think of passports when traveling internationally, but
some people may find that passports are required for domestic travel
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in 2016. That could make the IRS hold even more serious. The list
of affected taxpayers will be compiled by the IRS. The IRS will use
a threshold of $50,000 of unpaid federal taxes. But this $50,000
figure includes penalties and interest. And as everyone knows,
interest and penalties can add up fast. Notably, if you are contesting
that should not count. That is not yet a tax debt. There is also an
administrative exception, allowing the State Department to issue
a passport in an emergency or for humanitarian reasons. But how
that will work isn’t clear, nor is the amount of time it will take to
get special dispensation. You would still be able to travel if your tax
debt is being paid in a timely manner, as under a signed installment
agreement. The rules are not limited to criminal tax cases or where
the government thinks you are fleeing a tax debt. In fact, you could
have your passport revoked merely because you owe more than
$50,000 and the IRS has filed a notice of lien. A $50,000 tax debt
including interest and penalties is common, and the IRS files tax
liens routinely. It’s the IRS way of putting creditors on notice. The
IRS can file a Notice of Federal Tax Lien after the IRS assesses the
liability, sends a Notice and Demand for Payment, and you fail to
pay in full within 10 days. The right to travel has been recognized
as fundamental, both between states and internationally. And
although some restrictions have been upheld, it is not clear that
this measure will pass the constitutional test if it is challenged.
Speaking of challenge, it is not off-topic to mention FATCA, the
Foreign Account Tax Compliance Act. FATCA penalizes foreign
banks that don’t hand over American account holders. There are
approximately eight million Americans living overseas, many of
whom are still reeling from FATCA compliance problems.
If you should have a topic that you would like me to
discuss or if you should have a question, please feel
free to call 239.403.4410 or e-mail me at
michael@mwtaxandaccounting.com
An enrolled agent, licensed by the US Department
of the Treasury to represent taxpayers before the IRS for
audits, collections and appeals. To attain the enrolled agent
designation, candidates must demonstrate expertise in
taxation, fulfill continuing education credits and adhere to a
stringent code of ethics.
Life in Naples | December 2016