Will Undisclosed Offshore Accounts Cause Travel Issues?

Can I Travel with Unreported Foreign Accounts?

Can I Travel with Unreported Foreign Accounts?

One common concern many U.S. taxpayers worldwide have when they learn they are out of compliance with reporting foreign accounts, assets, investments, and income on their tax return is how this impacts their ability to travel both domestically and internationally. The main reason why this becomes a concern for taxpayers is that the IRS can deny and revoke passports for tax non-compliance. It’s also important to note that it is not limited to taxes per se; for example, if a taxpayer has been assessed foreign penalties for unreported foreign assets on Form 8938 or Form 3520, this can also be considered a tax debt. But it is also important to note that merely having unfiled FBARs or even significant FBAR penalties does not authorize the government to issue a passport denial or revocation. That is because the FBAR is not a tax form, but rather a FinCEN form. Here are a few things to know for taxpayers who are considering traveling while being out of offshore compliance.

First, USCIS and IRS are Not the Same

The first thing to keep in mind is that immigration and taxes are not the same. Being out of compliance for failing to report foreign accounts, assets, and income is not the same as being out of immigration compliance. In general, just being out of compliance with the IRS does not make you subject to any immigration enforcement — unless you have already had your passport denied or revoked by the IRS — and for taxpayers who receive this dreaded notice (508C Letter) the IRS must first provide you notice and an opportunity to resolve the matter.

Has the Taxpayer Been Penalized Yet

If the taxpayer has not yet been penalized, then they are in the best position to get into compliance and stave off any potential immigration issue. That is because by using one of the amnesty programs, the taxpayer can get into compliance before the IRS takes any action. If, alternatively, the taxpayer has already been penalized, then they are typically no longer eligible for the amnesty programs, and they should retain an attorney to negotiate directly with the IRS to try to resolve the issue.

Is the Taxpayer’s Immigration Status in Order

For taxpayers who are already experiencing immigration issues, they must get into immigration compliance if possible. But if the taxpayer is out of immigration compliance, that does not directly impact the IRS.

In other words, if the taxpayer is out of IRS offshore compliance but they have not been contacted by the IRS yet, then there should not be any direct tax compliance issue due to the immigration non-compliance. However, if they are out of immigration compliance, that is a separate issue that they should resolve.

Did the Taxpayer Receive a Notice, such as a CP508C Notice?

Taxpayers who are out of IRS compliance need to be cognizant that if they receive a 508C notice from the IRS, time is of the essence.

This is the notice from the IRS that tells you that they know that the Taxpayer is out of compliance and that if they do not resolve the issue, they are going to deny or revoke the taxpayer’s passport. For taxpayers who are not citizens and travel on a foreign passport, it may not be as big of deal — but for taxpayers who only travel on a U.S.passport, this can cause a significant issue.

Is the Taxpayer Already Under Criminal Investigation

If taxpayers have learned from the IRS or Department of Justice that they are already under investigation, then they should confer with a criminal tax lawyer before making any representations to the IRS. Depending on the status of the investigation, this can also impact their travel abilities.

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 that 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.