Tax Law Center Blog

The United States Senate has passed a provision in proposed legislation that would allow the State Department to deny, limit or revoke passports to citizens with “seriously” delinquent taxes.

The passport provision is part of the Fight Offshore Tax Abuses amendment offered by Senator Carl Levin. The provision is part of the larger highway transportation bill. The United States House of Representatives is planning on taking up the bill next week. So this provision has several steps before it can become law.

The legislation defines “seriously delinquent” as taxpayers who owe a federal tax debt for which a lien or levy may be filed. They define seriously as more than $50,000 but that amount would adjust for inflation in future years. There would also be exceptions when the tax payer has a payment plan with the IRS or a hearing is pending. The legislation would apply to a variety of taxpayers including those who default on installment agreements, including those who may default on payments under the Offshore Voluntary Disclosure Initiative (OVDI or OVDP).

The legislation (in its current form) appears not apply to taxpayers who simply fail to file returns, including Reports of Foreign Bank Accounts (FBARs). However, the timing of the legislation is interesting. The privilege of foreign travel via passport issuance has never been successfully connected to tax payments.  The tone of this legislation is alarming.  Simultaneously, the IRS has announced its new 2012 OVDP program. 

Also some offshore banks are beginning to advise U.S. account holders of their obligations to report the accounts by filing FBARs and report income earned on the foreign accounts for income tax purposes. Most foreign banks will ultimately report U.S. depositor account information to IRS. The IRS will then be able to assess tax, interest and penalties on the unreported income and begin lien and levy action. The legislation if passed by the House and signed by the President would enable the IRS to request revocation of or limitations on a U.S. taxpayer’s passport.

Our law office, which represents many taxpayers throughout the U.S. and around the world with undisclosed offshore accounts, believes that these recent developments should encourage U.S. taxpayers with undisclosed offshore accounts to come forward before the government contacts them. If the government contacts you, do not provide any information and seek competent legal assistance immediately.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.