IRS Says 'You Owe Us Money – Bye-Bye US passport!'

Travelers would be wise to include their tax and immigration legal teams on speed dial.

January 1, 2016 marked a new era for Americans living abroad, as the 'Fixing America's Surface Transportation Act' (FAST) is now effective. The FAST Act authorizes the denial of a passport application or the revocation of a current passport where the individual has more than $50,000 of unpaid federal taxes.

This unprecedented coordination between the IRS and Customs allows the IRS to instruct Customs to stop U.S. taxpayers and confiscate their passports as a result of an alleged tax obligation.

Disproportionately harmful to Americans living abroad

Americans living and working abroad depend on their passports for traveling, conducting financial transactions and identification. Naturally, having this important piece of documentation revoked suddenly could cause substantial harm and distress.

Imagine an American businessman who relocated himself and his family three years ago in order to work in Germany. He travels to New York for a quick business trip. On arrival at JFK, he is informed that his U.S. passport has been revoked because he allegedly has a 'seriously delinquent tax debt.' The customs official confiscates his passport and refuses to give it back. Our American businessman will not be able to go back to Germany to visit his children until he has cleared up his tax situation.

Under the authority of the FAST Act, the U.S. government can keep this businessman's passport until he pays the full amount of tax he owes or until he is able to prove that he does not owe this amount in a federal district court or the Tax Court. This quick business trip could quickly turn into an extended travel nightmare, subjecting this unsuspecting traveler to financial, social and professional harm. The resolution of the dispute could take weeks, months or years.

Expats are unaware of their US tax filing requirements

The United States taxes its citizens on their worldwide income. Further, Americans (at home or abroad) must report their foreign financial assets each year or face criminal penalties and a host of draconian civil penalties. This can be particularly confusing for Americans living abroad, as most countries impose tax based on residence, not citizenship. Accordingly, Americans abroad can be ill advised by well-meaning accountants within their country of residence as to their U.S. reporting and tax obligations.

U.S. taxpayers who have moved to a high-tax...