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Old 04-11-2021, 01:35   #1
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Warning for U.S. Citizens

This sounds pretty wild, but apparently really true:


https://www.iexpats.com/irs-set-to-c...ith-tax-debts/


You can get stuck with a cancelled passport (!) if you have an outstanding tax bill. Seems like a basic human rights violation, but there you are. Be careful!!
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Old 04-11-2021, 03:07   #2
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Re: Warning for U.S. Citizens

The real question is what happens if you have a canceled passport.

It would be a big hassle but ultimately, I don't think they can't stop you from entering the country. If you can get back into the states, any concern about human rights violations are a bit overblown.

Now if you are just bouncing around internationally on your US passport...I think it falls under the category of they don't care. Come back to the states, settle up and you can get your passport back.

As you indicated on a different thread regarding govt actions...it's not one day late and they cancel your passport. There is a process with notifications and significant time before they take any action. It really would be the outlier who might be affected.
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Old 04-11-2021, 03:42   #3
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Re: Warning for U.S. Citizens

Quote:
Originally Posted by Dockhead View Post
This sounds pretty wild, but apparently really true:
https://www.iexpats.com/irs-set-to-c...ith-tax-debts/
You can get stuck with a cancelled passport (!) if you have an outstanding tax bill. Seems like a basic human rights violation, but there you are. Be careful!!
Your reaction seems somewhat hyperbolic, to me.
If you're overseas, the State Department may issue you a "limited validity passport", good for direct return to the United States. [as I'm sure you know]
If you pay your taxes, you don't have to be particularly careful.


FWIW: The IRS certifies seriously delinquent tax debt to the State Department. Seriously delinquent tax debt is an individual's unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $54,000 (adjusted yearly for inflation) for which a:
Notice of federal tax lien has been filed and all administrative remedies under the law have lapsed or have been exhausted, or
Levy has been issued.
There are also numerous exclusions.
https://www.irs.gov/businesses/small...n-unpaid-taxes
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Old 04-11-2021, 04:20   #4
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Re: Warning for U.S. Citizens

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Originally Posted by valhalla360 View Post
The real question is what happens if you have a canceled passport.

It would be a big hassle but ultimately, I don't think they can't stop you from entering the country. If you can get back into the states, any concern about human rights violations are a bit overblown.

Now if you are just bouncing around internationally on your US passport...I think it falls under the category of they don't care. Come back to the states, settle up and you can get your passport back.

As you indicated on a different thread regarding govt actions...it's not one day late and they cancel your passport. There is a process with notifications and significant time before they take any action. It really would be the outlier who might be affected.


As long of course as the existing passport remains valid
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Old 04-11-2021, 04:20   #5
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Re: Warning for U.S. Citizens

Quote:
Originally Posted by GordMay View Post
Your reaction seems somewhat hyperbolic, to me.
If you're overseas, the State Department may issue you a "limited validity passport", good for direct return to the United States. [as I'm sure you know]
If you pay your taxes, you don't have to be particularly careful.


FWIW: The IRS certifies seriously delinquent tax debt to the State Department. Seriously delinquent tax debt is an individual's unpaid, legally enforceable federal tax debt (including interest and penalties) totaling more than $54,000 (adjusted yearly for inflation) for which a:
Notice of federal tax lien has been filed and all administrative remedies under the law have lapsed or have been exhausted, or
Levy has been issued.
There are also numerous exclusions.
https://www.irs.gov/businesses/small...n-unpaid-taxes
Not hyperbolic at all. Practically direct quote:

"Thousands of US expats with large tax debts may be stranded overseas when* they lose their passports from this month, warns the Internal Revenue Service."

Does not concern me personally, as I am economically active and in constant contact with the Infernal Revenue Service, pay taxes every quarter, and have never had any disputes with the tax authorities.

But a lot of long term expats have less to do with the IRS, and don't get physical mail - especially cruisers. I am posting this in the hopes it will help someone.
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Old 04-11-2021, 04:27   #6
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Re: Warning for U.S. Citizens

Quote:
Originally Posted by valhalla360 View Post
. . . As you indicated on a different thread regarding govt actions...it's not one day late and they cancel your passport. There is a process with notifications and significant time before they take any action. It really would be the outlier who might be affected.
Certainly doesn't come out of the blue, but I don't think people getting caught by this would be an outlier. A large percentage of US long term expats don't need to pay taxes because of the foreign earned income exclusion. This does not relieve them of the obligation to file, but it's easy to let it slip when you've been overseas for years and you're anyway paying taxes in another country. Some are not even aware of the obligation. If the IRS doesn't have a valid address for you, you really might miss a problem building up, even if it takes years.
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Old 04-11-2021, 06:34   #7
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Re: Warning for U.S. Citizens

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Originally Posted by goboatingnow View Post
As long of course as the existing passport remains valid
There is really no question they will let citizens back in the country but as mentioned, expect lots of hassles as the passport will not be valid.

Probably have to visit the nearest embassy/consulate and get some sort of exemption to get back into the states. Don't expect them to fall all over themselves to fix it for you.
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Old 04-11-2021, 06:39   #8
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Re: Warning for U.S. Citizens

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Originally Posted by Dockhead View Post
Certainly doesn't come out of the blue, but I don't think people getting caught by this would be an outlier. A large percentage of US long term expats don't need to pay taxes because of the foreign earned income exclusion. This does not relieve them of the obligation to file, but it's easy to let it slip when you've been overseas for years and you're anyway paying taxes in another country. Some are not even aware of the obligation. If the IRS doesn't have a valid address for you, you really might miss a problem building up, even if it takes years.
What's that old saying...ignorance is no excuse for the law.

This isn't rocket science. If you move overseas and make no effort to learn the rules, that's on you. Likewise, updating your address, so they can get in contact, is on you.

I don't see this as a big threat if you make even a modest effort at staying legitimate.
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Old 04-11-2021, 06:51   #9
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Re: Warning for U.S. Citizens

Quote:
Originally Posted by Dockhead View Post
Certainly doesn't come out of the blue, but I don't think people getting caught by this would be an outlier. A large percentage of US long term expats don't need to pay taxes because of the foreign earned income exclusion. This does not relieve them of the obligation to file, but it's easy to let it slip when you've been overseas for years and you're anyway paying taxes in another country. Some are not even aware of the obligation. If the IRS doesn't have a valid address for you, you really might miss a problem building up, even if it takes years.
As you pointed out, any U.S. citizen making over $12,400 in worldwide income are required to file a tax form every year. And literally the second line on the 1040 after you name is your address. So there are a few groups who would run afoul of this. The first are cruisers who aren't filing taxes as required by law for multiple years in a row. If someone "let's it slip" or "are not aware" of this obligation there's about as much sympathy for someone in the U.S. who claims the same excuses. The second are people who repeatedly put down an address on their return over the several years required to trigger this action that is not an actual address they can receive mail at. Again, zero sympathy for that, it's trivial to set up a mail forwarding address or put down a friend or family member's address. The final group would be the unicorns in the leprechaun forest who once made enough to have a $54,000 tax debt AND somehow didn't know about it AND then make less than $12,400 per year in worldwide income for several years in a row AND don't have any way to be reached. I would have some sympathy for that group, I just think they're vanishingly rare.
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Old 04-11-2021, 07:00   #10
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Re: Warning for U.S. Citizens

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As you pointed out, any U.S. citizen making over $12,400 in worldwide income are required to file a tax form every year. And literally the second line on the 1040 after you name is your address. So there are a few groups who would run afoul of this. The first are cruisers who aren't filing taxes as required by law for multiple years in a row. If someone "let's it slip" or "are not aware" of this obligation there's about as much sympathy for someone in the U.S. who claims the same excuses. The second are people who repeatedly put down an address on their return over the several years required to trigger this action that is not an actual address they can receive mail at. Again, zero sympathy for that, it's trivial to set up a mail forwarding address or put down a friend or family member's address. The final group would be the unicorns in the leprechaun forest who once made enough to have a $54,000 tax debt AND somehow didn't know about it AND then make less than $12,400 per year in worldwide income for several years in a row AND don't have any way to be reached. I would have some sympathy for that group, I just think they're vanishingly rare.
Also, while you don't HAVE TO file if your income is very low, you are still ALLOWED to file.

If I had a $65k+ tax bill one year and $0 the next, I would probably file anyway to affirmatively point out to the IRS that my tax situation has changed, since that's a huge difference from expectations.
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Old 04-11-2021, 08:34   #11
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Re: Warning for U.S. Citizens

BTW the same holds true for child support. If you owe back payments on child support, the states report this to the US State Dept. and they confiscate your passport.

If you send in your passport for additional pages, they confiscate and shred it...
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Old 04-11-2021, 08:34   #12
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Re: Warning for U.S. Citizens

That's been going on for a long time.

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Old 04-11-2021, 08:40   #13
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Re: Warning for U.S. Citizens

The U.S. department of state will cancel passports for many reasons, among them:
* an arrest warrant from any U.S. jurisdiction
* unpaid child support or spousal maintenance over $5000
* delinquent taxes over threshold amounts, including state and local taxes

* if ordered by a judge to remain in the USA as a condition of release while awaiting trial


These are all done administratively and without much recourse for the person affected.
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Old 04-11-2021, 09:08   #14
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Re: Warning for U.S. Citizens

Passport "cancelled"... my experience.
I was on an international trip, flying back to the good old US of A, and happy to be going home. Usually, I fly direct. This time, I had a connection, so I departed my foreign residence (Schengen country) to connect with another flight in another Schengen area airport for my flight to ORD.
Flying from Sweden to Denmark, in this instant case, is like flying from Chicago to Detroit. Just get on the plane.
When I got to Denmark, I went through Passport Control and got stopped. The border agent said my passport had been "reported stolen"... and the adventure begins....
My flight to ORD was leaving in... minutes.
The Danish Border guy took my credentials and disappeared behind a door.
Sweating... no internets... OMG. It did not matter that I had my passport literally in my hand. The Border guy handed me off to another border guy who called "America" to inquire.
They were now paging me in the airport. My luggages were on the plane already - thank God, because they would otherwise have left without me.
The border guy was very friendly, helpful and trying to figure out what was going on.
I had been recently traveling to Hong Kong, I think it was.. I suspected some sort of identity theft type situation that went a little sideways.
The border guy was still on the phone. The airline was desperately paging me to get my @s$ on the damm plane. Finally, the border guy handed my credentials back to me and said, "get on the plane. The US will figure it our when you arrive".
Thank God and Baby Jesus!
I ran down, boarded, and (I am an incredibly lucky bastard) and got upgraded to that class of travel that is not First Class, but is right behind it. And there was a pretty lady sitting next to me. I took my fancy, new seat and announced my situation to the cabin, along with a warning that I would be getting totally tied with free booze on this 8 hour flight to assuage my stress over a "stolen passport". Sometimes free booze is a great thing.
During the flight, I actually did not drink that much. I spent most of the time on the phone, so the cabin was way too aware of my situation, poor bastards.
As we landed and pulled in to the gate, the captain came on and said, "all passengers, please have your documents ready for inspection by Border people".
I said not to worry, they are just looking for me and they might come on here with a crew to "extract"....
no goon squad showed up on board, but right after debarkation, they got me, and the "random" check was over. I felt vert special! I have not had 4 people meet me at my flight in many a moon!
Down at border control, they explained my passport was "stolen", despite my efforts to say, no, I have it, it right here.
Nope, stolen.
But I have an international flight in 2 weeks. I cried. That is not time to get a new one.
Nope, stolen.
Do I get like a voucher or something, so that I can get expedited expedting for a new passport?
Nope.
But they did give me a receipt for the passport I had.
Technically, a passport is a document owned by the issuing agency, so it is theres, not mine.
I walked out with a slip of paper and made haste to the post office to apply for another passport. The passport agent had never seen a document like mine.
"Where is your old passport"
It was stolen I says. See here, i got a receipt from the "thief".
This is a pretty funny story now that it is a few years old.
I paid all the money for a new passport and expedited all that stuff.
In a few weeks, I had a new passport.
No real problems, other than massive inconvenience.
My passport was listed as being "reported stolen", so it was confiscated. I suppose in the end, it is probably better that I suffered some inconvenience and added expense. I would hate to think of someone actually making it through customs and what they might do..
So I took one for the team.

I suspect that if one had an IRS debt, it might be a little more involved to get that passport replaced.
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Old 04-11-2021, 09:33   #15
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Re: Warning for U.S. Citizens

Quote:
Originally Posted by Jammer View Post
The U.S. department of state will cancel passports for many reasons, among them:
* an arrest warrant from any U.S. jurisdiction
* unpaid child support or spousal maintenance over $5000
* delinquent taxes over threshold amounts, including state and local taxes

. . .

These are all done administratively and without much recourse for the person affected.
I had no idea -- thanks for the learning moment.


The only other country which does something like this, to my knowledge, is Russia -- where they will simply not let you out of the country, whether you're a Russian citizen or not, if you have delinquent debts of any kind confirmed by a court.



So, again, one should be careful.


To all those who are reading this only to make smug moral judgements about people who might find themselves in such a situation -- all I can say is, there but for the grace of God. As a long time (30+ years) expat myself, who has known many people like myself, it is actually very common, even among very honest and otherwise very diligent people, to get out of compliance with tax filings back home. It is also very, very common not to be reachable by physical mail from the States when you've been gone a long time and have few ties to the States, and ordinarly don't ever get mail from the States, and it is not even that easy to keep yourself reachable by physical mail from the States if you've been gone 10+ years and move around a lot. So, I would suggest zipping the smugness, have a little empathy for other people, and spread the word in case you know anyone with this kind of lifestyle.


And you can rack up a $50k tax bill in no time even if you have zero income taxes -- how many long term expats have I met who are altogether unaware of the FBAR filing requirements? Lots. You can rack up $50k in penalties over FBAR filings in a trice. The penalty is $10,000 per violation -- all you need is 5 bank and financial accounts and one missed year, a FinCen agent who got up on the wrong side of the bed, and you can get whacked for $50,000, or just one forgotten account for five years, and you're screwed.



There but for the grace of God -- I sometimes wake up in the middle of the night wondering if I forgot some filing or another, get up, go to my desk, check. I am very careful, but I have companies in several countries, pay taxes in several countries, file annual reports, tax filings, information filings, etc. etc. etc. ad nauseum - in several countries. I have good people helping me with all this, but ultimately you are responsible yourself for being sure every got filed properly and on time. It's really easy to make a mistake.
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