Thursday 31st May 2012

Picture of an American passport

This week the American Citizens Abroad group (ACA) have announced that they have sent a position paper to the Congressional members who are working on the Surface Transportation Bill opposing the proposed laws to allow the IRS to revoke the passports of those citizens living overseas who are believed to owe back taxes in excess of $50,000.

According to IRS plans, Americans living abroad who are deemed to owe the back taxes will have their passport suspended until all overdue monies are paid. However, ACA argue that the tax reporting requirements for American citizens living abroad are extremely complicated and this opens the process up to the possibility of mistakes. They believe that the new provision would constitute discrimination against American expats, many of whom rely on their passports to conduct their everyday affairs abroad.

In response to the proposed law, which will constitute an enactment of a provision that is contained within the Senate Surface Transportation Bill (S.1813 - Moving Ahead for Progress in the 21st Century Act), ACA have written a letter to congress communicating their opposition and respectfully requesting that it is withdrawn from the bill. Talking in a press release, Marylouise Serrato, ACA Executive Director, stated: “This provision creates a tax-collection mechanism that is frankly far too draconian. It discriminates against Americans abroad who, unlike Americans living in the US, are overwhelmingly reliant upon their US passports in their everyday lives.”

The complaint has happened amid numerous recent events pertaining to American expatriate’s ongoing struggle to meet IRS requirements. In February this year, expatriates in Switzerland were dismayed to hear that Swiss banks were forcibly closing their bank accounts in a bid to evade the onerous reporting requirements of FACTA and to avoid any clash with domestic privacy laws. In retaliation to the increasingly complex reporting requirements many American expats have chosen to relinquish their passports, only to be informed last week that this could lead to severe punishment if the Internal Revenue Service believed that they relinquished their passport in order to avoid paying taxes.

ACA argue that the complexity of the tax rules and their associated reporting requirements entail that mistakes are more likely to happen as a result of the greater complexity of the tax codes, unreliable mail service, difficulty in speaking directly to IRS agents from abroad, confusion over IRS letters and forms, and the use of currency exchange rates. As such, implementing actions to remove the passports of U.S. citizens who are accused of owing taxes may be too extreme and may seriously impact the lives of Amercian citizens abroad, many of whom need their passports to go about their daily lives. In the event that such expats are accused of owing more than $50,000 USD in taxes and their passport is removed, they will not be able to travel anywhere outside their country of residence and will be unable to perform many every-day tasks that require identification. Serrato emphasized: “Individual Americans overseas should not have to pay an extreme price to improve the IRS’s tax collection procedures.”

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