Thursday, April 21, 2011

No taxes, no passport

I know this has been discussed and rejected in the past, but it looks like Congress may again consider going after international tax dodgers. While it's admittedly a press release put out by an expat tax service, the claim is that a March 2011 report by the GAO recommends withholding the passports of tax dodgers.

If this goes through, it could be interesting. It's estimated that there are over 5 million Americans living abroad. Quite a few of them have likely stopped paying taxes. I wonder how many might be impacted?

While some of this mess is undoubtedly for taxes incurred while living in the US, much of it's also for taxes incurred while living abroad. Yes, it sucks that the US is the only developed nation to tax its citizens overseas (in fact, the only other nation I know taxes their expats is Eritrea and it was being considered for Zimbabwe). Nice company the US is keeping there.

I do find this particularly worrisome because the US has not had a stellar track record in being reasonable in this area and expats are always an easy target for politician's ire. Further, as I understand it, the US tax courts do not allow you to challenge a tax assessment until you've paid the assessment. Thus, I wonder if people could find themselves in the position of having their passports confiscated because the IRS mistakenly thinks they're delinquent.  If you live and work overseas and are visiting in the US, this could destroy you financially.