Monday, April 9, 2012

Get passport seized by a bureaucrat's accusation

Passport 1
Not as useful as you thought?
Photo by The Wide Wide World
Could you imagine having your passport seized because of an IRS error and suddenly you can't return home any more? I have a wife and daughter here in France and the thought of not being able to return to them (not to mention having my life destroyed) is a nightmare. Unfortunately, this may become a very real scenario for some.

One of the problems with being an expat, particularly a US one, is that your government really doesn't give a damn about you. There is widespread ignorance about expats and we have to face silly things like Congressman Tierney (an otherwise great guy) trying to bankrupt expats by removing our earned income exemption. To a certain extent, many laws surrounding expats are passed in ways that many laws surrounding computers are: by men and women who have no idea what the actual impact of their laws would be.

Now here's another one. A bill in Congress would allow suspension of your passport on there mere accusation that you owe taxes. From the article:
Senate Bill 1813 (Highway trust fund), which was passed by the Senate last week and is now pending in the House of Representatives contains a provision that would allow the IRS to order the State Department to refuse to grant, refuse to renew, revoke or restrict the passport of any US citizen which the IRS certifies owes the IRS $50,000 or more in unpaid taxes. There is no requirement that the tax payer be guilty of or even charged with tax evasion, fraud, or any criminal offense - only that the citizen is alleged to owe the IRS back taxes of $50,000 or more.
How does anyone think that punishing expats without due process is a good idea? Imagine you're an expat living in South Africa and some bureaucrat at the IRS has decided that you owe $50,000 in back taxes. If the bill passes, you don't even need to be charged with any crime or have any proof presented: you can simply lose your passport and effectively be "stateless" unless you have a backup passport.

For further reading of the implications, I recommend Passport Restrictions in Highway Bill, a short article by Charles M. Bruce, a partner at Moore & Bruce LLP (Washington, D.C.) and counsel at Bonnard Lawson (Lausanne, Switzerland).


  1. This is shocking? Doesn't every country do something similar? Each time I go to the airport in Amsterdam, and my passport is scanned, a check is done to see whether I still owe taxes, or have unpaid fines. Wouldn't be able to leave the country if I did. Even if I had a family living abroad.

    1. Its another tool in the box of tyranny. Put it together citizenship based taxation (with no representation or benefits), FATCA, and the proposed repeal of FEIE and it will be a real monster for Americans living abroad.

    2. Abigail, did you miss the whole "no proof required" bit? When you read through it, the IRS merely has to certify that you owe these taxes. There are plenty of instances where the IRS has incorrectly accused people of not filing taxes.

      Given that the US has one of the most complicated tax codes on the planet, these mistakes will continue and if this passes, more innocent people will be hurt. If there was some higher standard, or some review process, I would feel better about this, but there's not.

      This is by the same politicians who recently tried and failed to end the FEIE. Everybody wants to pass laws punishing expats and no one thinks about the consequences.

  2. What do you think happens if I'm stopped at Amsterdam airport because Dutch taxes civil servant typed in the computer I owe taxes, and I wave to the officer and say, "Well, you don't have any actual proof right there, do you; I'm just going to pretend the Dutch revenue service made a mistake", wave, and continue on my merry way? Do you think I'll be making my flight? Do you think at the moment it matters whether I really owe any taxes, or a mistake was made?

    1. Just because the Netherlands does the wrong thing doesn't mean that it's OK for the US to do the wrong thing. The right thing to do, if such a problem exists, is to try to notify the individual of the issue (I'm not saying that the notification should be successful) and, if they are seriously delinquent, press charges. Once a person is brought up on charges, it's quite reasonable to take a passport due to them being a flight risk. This is not something that should happen for, say, a €50 ticket. In that case, seizing someone's passport and preventing them from flying home is a completely unreasonable response to the amount involved.

      In the US, I think the $50K tax minimum is actually too high and I certainly would have no objection to it being lowered, but I would want a higher standard of evidence — not an error-prone bureaucracy imperiously declaring who is and is not allowed to leave the country. If it's a demonstrated problem, let them bring charges and then seize the passport, as is consistent with other criminal proceedings. If there is no criminal act alleged, there should be no right to seize a passport.

      On a related note, the US passport, per Haig vs Agee, can only be revoked if there is a serious threat to national security or foreign policy. I realize that seizure and revocation are not the same thing, but frankly, there's not much difference if a person flew to a conference in the US and had their passport seized with the IRS alleging that they owe $75,000 in back taxes. Assuming they can't pay that amount, their passport is effectively revoked, they can't return to their family or their job and they're stranded in the US.

      They now have no home and, quite probably, no money.

      They could contest the tax assessment in a US tax court, but they generally rule in favor of the IRS. Further, as there are only 19 tax court judges covering 50 states, it could take months to go to trial. How do you afford a lawyer? How do you survive in the intervening months? They could then go a federal court, but that requires they pay the disputed taxes in full up front. And if you won, you could still wait months to receive your money, or wait years while the IRS contests the ruling.

      If there were criminal charges brought, at least there would be another set of eyes reviewing the evidence and determining if there was cause to bring said charges.

  3. A good video of a fictitious dialogue between two expats in Switzerland. One has been living like a native for a long time, the other keeps strong connections with the Homeland. The difference of perceptions is interesting.

  4. Knowing a couple of people who've been on the receiving end of an IRS error, I got curious about how often that sort of thing happens. I did a super-quick search but only found this article:

    I sure hope that's improved in the last 20 years.

    It's hard enough trying to get those fixed when you have access to resources like accountants and lawyers. I can't imagine trying to do that if you were stranded here without a job. :(

    1. Hi G. What a scary article you listed, when combined with the story above. I wonder if their are expats who will refuse to return the the US out of fear :( Of course, many expats are just giving up their citizenship. It will be interesting to see the next renunciation numbers.