Living abroad or having foreign investments has been rapidly becoming more and more complex during the last 10 years. With the Foreign Account Tax Compliance Act (FATCA), Report of Foreign Bank and Financial Accounts (FBAR) and Form 8938, maintaining scrupulous compliance with U.S. tax laws has become essential.
Adding to the list is the latest F-acronym, the FAST Act. This stands for "Fixing America's Surface Transportation" and if you are wondering what that has to do with the Internal Revenue Service and the payment of taxes, you may not be alone. Congress, it seems, cannot pass any stand-alone legislation these days, and so important funding bills attract many unrelated pieces of legislation.
FAST is important to taxpayers because it contained new provisions which allow the IRS and the State Department to revoke passports. State can revoke for a typo on your Social Security Number, so you should be extremely careful to make no mistakes on your application.
The IRS is now permitted to revoke passports for "seriously delinquent" taxpayers. What counts as seriously delinquent is defined as owing more than $50,000 in taxes, penalties and interest, and this is indexed for inflation.
If you live overseas or have investment accounts and income from overseas interests, you need to be certain that your accountant and tax preparer understand the operation of U.S. tax laws on overseas finances.
The penalties for non-compliance under FACTA are severe and the penalties can rapidly escalate to the point where they exceed the value of the investments themselves. Additionally, the loss of a passport could create criminal penalties for your foreign travel.
This is not a scenario where you want to wait until you receive an inquiry from the IRS. You want to be absolutely certain there are no mistakes or irregularities with these matters. And it is important to have knowledgeable tax help with these matters, as the complexity of this area makes it difficult for taxpayers to achieve compliance without professional help.
Source: wsj.com, "Tips For U.S. Expats Coping With New FAST Law Affecting Passports," Jonathan Lachowitz, December 13, 2015