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Owe Taxes? You May Lose Your Passport

Thursday, January 7th, 2016

Little did most people know, but when passing the “Fixing America’s Surface Transportation Act” also known as the “FAST Act” lawmakers hitched a tasty treat for the IRS.   Hidden in the thirteen hundred pages, is Section 32101 – Revocation or denial of passport in case of certain unpaid taxes which adds language to IRC Section 7345, specifically subsection (e) to give the IRS the power, upon providing a certification to the Secretary of State, to demand the Secretary of State not issue a passport to any individual who has a “seriously delinquent tax debt”.

A seriously delinquent tax debt is anything $50,000 or more.  Now you might be thinking well, $50,000 is a lot to owe in Federal Taxes, but this provision includes aggregating not only the tax obligation but also any penalties and interest owed on such obligation.  This is an extremely important point, specifically for those United States citizens who work overseas, because if a US citizen fails to disclose foreign bank accounts aggregating in excess of $10,000, the citizen can be hit with penalties as high as the $100,000 for each foreign account intentionally not disclosed and even a penalty of $10,000 per violation for unintentional failures to disclose.

Thus, even if you did not know you were supposed to disclose your foreign bank accounts to the IRS, and even if you did not know know you were supposed to file a US tax return, and even if you made all your money outside of the United States (and after reading this you now know!) you can still be hit with significant penalties, and those penalties will quickly add up to the point where you could lose your passport.

So for those of you who work overseas, are paid overseas and have neglected to pay taxes, be aware.