Can I Visit the U.S. if I Live Abroad and Owe U.S. Taxes?

Can I Visit the U.S. if I Live Abroad and Owe U.S. Taxes?

I Reside Overseas and Owe U.S. Taxes 

U.S. tax law can be very onerous and complicated. As a result, when a U.S. Taxpayer is an expat who resides overseas, they may stop filing U.S. tax returns — either because they do not believe they are still required to file taxes or it has just become to overwhelming to do on an annual basis. As such, it is not uncommon for expat taxpayers to find themselves out of U.S. tax compliance. Usually this is because the Taxpayer simply misunderstood the reporting and tax requirements for U.S. persons who reside overseas. And, one common question we receive often is whether or not a taxpayer can return to the United States if they live abroad but owe taxes to the United States. The answer is yes, taxpayers can travel to the United States even if they owe taxes. But, there may be some hiccups along the way depending on whether it is a serious tax debt and/or if the IRS has issued a passport denial or revocation. Let’s look at some of the basics.

Example of When an Expat Owes Taxes

Here is a common example: Jeffrey is a US person who lives overseas. He currently resides in a foreign country that does not have any personal income tax requirements. Since the majority of income that Jeffrey earns is outside of the United States and the US income that he does earn is below the exemption amount for single taxpayers, he misunderstood that he was still required to file US tax returns each year and report his foreign accounts. Jeffrey has about a $150,000 annual tax liability.

Taxpayer Has Not Had His Passport Revoked

To the Taxpayer’s knowledge, he has not had his passport revoked. Therefore, Jeffrey is still able to travel to the United States on his U.S. passport. It is important to note though, that based on the amount of tax liability he owes, if it becomes an IRS enforcement priority, then Jeffrey may become subject to a passport revocation action due to this serious delinquent tax debt. 

What Can a Non-Willful Taxpayer Do to Get Compliant?

Presuming that Jeffrey is non-willful, he can potentially submit to the Streamlined Filing Compliance Procedures. If he meets the requirements for the streamlined foreign procedures, then he can avoid all penalties on his various foreign accounts and assets. If Jeffrey does not qualify for the Streamlined Foreign Offshore Procedures (SFOP), unfortunately, he will not qualify for the Streamlined Domestic Offshore Procedures (SDOP) — which is for US taxpayers who may live overseas but do not meet the strict requirements of being a foreign person. That is because he did not file original tax returns during the years in question (SDOP and not SFOP requires that Taxpayer filed original tax returns). Instead, the Taxpayer should consider making a detailed and comprehensive reasonable cause submission and working with the Board-Certified Tax Law Specialist to ensure it is submitted properly. 

*Unfortunately, there is no attorney-client privilege with a CPA, so taxpayers must be careful in case they are audited in the future (the accountant-client privilege is limited and does not extend to the same length that the attorney-client privilege does).

Willful Tax Compliance

If instead, Jeffrey was aware he should have been filing his U.S. tax returns but just decided not to (because he never thought he would be returning back to the United States), this would not qualify for the Streamlined Procedures or other non-willful programs — or even reasonable cause which does not apply in situations in which a taxpayer is willful. Rather, the taxpayer would submit to the IRS Voluntary Disclosure Program (VDP).

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.