http://news.investors.com/article/608156/201204171850/irs-ta...The Republican House of Representatives may soon follow the Democratic Senate and give the IRS the power to confiscate your passport on mere suspicion of owing taxes. There's no place like home, comrade....the "bipartisan transportation bill" that just passed the Senate... Contained within the suspiciously titled "Moving Ahead for Progress in the 21st Century Act," or "MAP 21," is a provision that gives the Internal Revenue Service the power to keep U.S. citizens from leaving the country if it finds that they owe $50,000 or more in unpaid taxes — no court ruling necessary.___________________________http://www.reuters.com/article/2012/04/16/us-usa-citizen-ren...the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.... asks foreign financial institutions such as banks, hedge funds, and private equity funds to provide the IRS with information on U.S. clients."I hear about banking problems again and again and again," says Phil Hodgen, an attorney who has been helping Americans expatriate since 2008. The new reporting rules, he says, pose "a huge administrative burden. It's made Americans too expensive to keep."Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association, says she has received a number of calls from Americans in Europe complaining about banks closing their accounts. "They're going to drop Americans like hot potatoes," Mordi says. "The foreign banks are upset enough about the regulations that they're saying they just won't keep American customers, and it's giving (Americans living abroad) a lot of sleepless nights."Genette Eysselinck renounced [her US citizenship] early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path [as opposed to divorcing her husband].She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process "gut wrenching.""I grew up in a military family where patriotic feeling was very strong" Eysselinck says. "I'm amazed at how terrible I felt renouncing. But it was the only way to get them off my back. It's very distressing and time consuming to keep up with all the paperwork. But if it's this bad when I'm 64, how bad will it be when I'm 74?"__________________If you want to live abroad but can't open a bank account because the banks don't want to deal with the IRS reporting hassles, you might as well turn in your passport even if you don't owe anything.--fleg
The Republican House of Representatives may soon follow the Democratic Senate and give the IRS the power to confiscate your passport on mere suspicion of owing taxes. "Mere suspicion" my left foot. I haven't looked at the House version, but the Senate version required the presence of a Federal tax lien, which doesn't arise unless you self-assess and don't pay or a deficiency is assessed after you have an opportunity to appeal, including judicial review, and you don't pay. That said, I wish I still had some contacts at the IRS so I could find out whether this was their initiative or someone else's. Many years ago I tossed a similar idea around with Counsel, who quickly said that it would likely run into severe Constitutional problems.If it's enacted and enforced, I'm sure we'll find out in due course.Genette Eysselinck renounced [her US citizenship] early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path [as opposed to divorcing her husband].Uh huh. Sure. Right. Nevermind that she could have filed Married, Filing Separately, and her husband would be required to share squat with the IRS. Much simpler to, shall we say, forget to mention her most obvious option. Pure oversight, I'm sure. As the Church Lady would say, "How convenient."She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process "gut wrenching.""I grew up in a military family where patriotic feeling was very strong" Eysselinck says. I just love it when people who don't comply with the tax law wrap themselves in the flag. I have one word for Ms. Eysselinck. Twaddle.PhilRule Your Retirement Home Fool
When I first heard of this I thought it had some merits but wondered what happens when someone who earns their living traveling overseas gets caught in this net. Does the IRS take away their ability to earn the money to pay the IRS?
Thanks for the in-depth response. But it's not just Investors Business Daily (my original link) that's reporting the story as I excerpted it. This is from The Atlantic, a left-wing publication that's not exactly hostile to big government. And it sounds like the law professor they interviewed for the article takes it seriously, although it's always possible that any given law professor doesn't know what he's talking about:http://www.theatlantic.com/business/archive/2012/04/no-taxes...You're standing at the airport. The ticket agent clacks away on the keyboard. She looks up. "I'm sorry," she says. "We can't let you board the plane today." Why? "It's the IRS. They say you haven't paid all of your taxes."It sounds like the opening scene of a straight-to-DVD Washington thriller. It's actually a few votes from becoming a reality. A new bill, quietly making its way through Congress, allows the federal government to stop people with unpaid taxes from leaving the country-- even if they haven't been charged with tax evasion or any other formal crime.... the bill includes a little-noticed section that allows the State Department to "deny, revoke or limit" passport rights for any taxpayers with "serious delinquencies."Here's how it would work. If someone owed more than $50,000 in back taxes, the IRS would be able to send their name over to the passport office for suspension, provided that the IRS already either filed a public lien or a assessed a levy for the outstanding balance. The bill does provide a few exceptions though. For example, if a person has set up a payment plan (that they're paying in a timely manner), is legitimately disputing the debt, or has an emergency situation or humanitarian reason and must travel internationally, they may be able to leave for a limited time despite their unpaid taxes. Timothy Meyer, a constitutional law professor at the University of Georgia, who's also served as a State Department lawyer, believes that, for all its creepiness, the rule is probably legal. He concludes that if the passport provisions of MAP 21 became law and were challenged, chances are, the courts would find that they satisfy Due Process concerns. Even though there's no judicial hearing before your travel rights are restricted, the bill does protect a passport holder who's challenging the alleged tax debt. And according to Professor Meyer, that's probably enough here. _________________________As far as an American living abroad filing MFS, if it were that easy to avoid the hassles I'm sure someone would have thought of it by now, for example, the attorneys and tax specialists who advise such people. European banks that are dropping American customers due to the IRS compliance hassles won't make an exception for MFS customers. And filing MFS would not eliminate the requirement to report accounts held jointly with a foreign spouse. Or possibly even entirely in the name of the foreign spouse, if other countries have anything like some states' community property laws. Or revealing information about a jointly-owned business the foreign co-owners might wish to keep private. I can't imagine Wells Fargo closing my Canadian DW's account because the Canadian tax authorities make it too much of a hassle for them to keep it open. Or her still having to pay Canadian taxes on her US income after living here for almost 40 years. We've got a barbaric tax code in that regard.--fleg
Or her still having to pay Canadian taxes on her US income after living here for almost 40 years. I am under the impression that my Canadian co-workers are filing both US and Canadian tax returns.
I am under the impression that my Canadian co-workers are filing both US and Canadian tax returns.If they have income generated in Canada, e.g., a brokerage account, rental housing, bank account, etc., they are likely required to do so. Canadians living abroad and earning nothing in Canada don't have to file. --fleg
Seizing someone's US passport won't stop them from leaving the country if they have a passport from another country.I know several families where one or both parents hold foreign citizenship, and many of them make a point to register their children as foreign nationals as well, so the kids have dual citizenship. One fellow I know is a citizen of the US, France, and Israel.These friends of mine are all Jews, and they do it so they can escape, if the need arises.(These folks aren't paranoid; like me, they believe the risk is very small. But the cost for that 2nd passport is also small, and the consequence of not having it can be very great indeed. Consider, for example, German Jews in the 1930s who had their German passports confiscated.)
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