- 1 How Taxpayers Can Navigate IRS Passport Revocation
- 2 Do You Even Owe Taxes?
- 3 Have You Been Filing Tax Returns?
- 4 Review the Assessed Tax Liability
- 5 Pay it or Dispute the Amount Due
- 6 Consider Entering a Payment Plan
- 7 Late Filing Penalties May be Reduced or Avoided
- 8 Current Year vs Prior Year Non-Compliance
- 9 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 10 Need Help Finding an Experienced Offshore Tax Attorney?
- 11 Golding & Golding: About Our International Tax Law Firm
Over the past several years, the Internal Revenue Service has significantly increased enforcement of U.S. Taxpayers who have not paid their outstanding tax liability. In general, taxpayers receive various notices and then they can either:
dispute the amount due,
challenge the IRS
pay the amount due, or
enter a payment plan to pay the amount due — while paying interest.
Taxpayers who have accumulated a substantial tax debt risk passport revocation. It is a serious enforcement protocol that the IRS has been using more frequently, especially with taxpayers who live overseas. These taxpayers, especially those who only have one passport, may find themselves in a serious predicament if they are stranded overseas without the ability to obtain a new passport slash renewal to travel back to the United States or anywhere else that they need to go. For taxpayers who find themselves in a situation in which their passport has been revoked, it is important to understand the different steps they can take and should take to try to get the situation resolved. Let’s look at some basics on how to navigate IRS passport revocation.
Do You Even Owe Taxes?
In most circumstances, the reason why a taxpayer may have had their passport revoked is because they have a substantial amount of tax liability. The amount is $50,000 but it adjusts for inflation. So, the first thing taxpayers should do is confirm that they have this amount of outstanding tax liability due. It is not unlike the Internal Revenue Service to make a mistake, and this is the type of mistake that could leave U.S. taxpayers stranded so this should typically be the first order of business.
Have You Been Filing Tax Returns?
The next consideration is whether the taxpayer has been filing tax returns. One of the most common situations involving expats is the situation in which they live overseas and based on the foreign earned income exclusion they don’t believe that they have any tax liability, so they have not filed returns. Had the taxpayer filed returns and either claimed the Foreign Earned Income Exclusion and/or Foreign Tax Credits, they may have no tax liability at all. Therefore, taxpayers who have not filed tax returns may want to consider what steps they should take to go back and file returns so that they can resolve the issue and potentially not have any outstanding tax liability.
Review the Assessed Tax Liability
If the taxpayer has been filing returns and they have an outstanding tax liability, they should confirm whether that tax liability is accurate and if they have already made payments that may have not been posted to the IRS system yet. It is not uncommon for some taxpayers who are in this situation to learn that the reason why they’re in this situation is because the IRS either lost their check or did not process the tax return payment properly. One common example of this is when the taxpayer who makes the payment uses their social security number on the check — but they are not the primary taxpayer on the tax return.
Pay it or Dispute the Amount Due
Once the taxpayer realizes that they have a tax liability due they should have assessed for how long that tax liability has been due to determine whether they should consider disputing it. Sometimes, the IRS does not have updated information for the taxpayer — so they have been sending notices that the taxpayer has simply not received. If taxpayers are still within various statutory periods, they may consider disputing the penalty by way of a collection due process hearing, appeal, or other protocol.
Consider Entering a Payment Plan
For taxpayers who have significant tax debt, and the debt is legitimate and the only out is paying it to get their passport reinstated come and then they may consider entering into a payment plan with the IRS to try to resolve the issue. The IRS enters payment plans that typically can last up to six years with the main downside being that the taxpayer has to pay accrued interest for the unpaid tax liability.
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.