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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121187  
Subject: Re: IRS to put up new Iron Curtain? Date: 4/19/2012 3:59 PM
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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.
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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
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