
Thousands of Americans Will Be Denied a Passport Because of Unpaid Taxes - gok
https://www.wsj.com/articles/thousands-of-americans-will-be-denied-a-passport-because-of-unpaid-taxes-1530869401
======
mankash666
I've had 2 instances where the IRS erroneously concluded that I owe them large
tax bills. It took a few months of back and forth paperwork and phone calls to
resolve, and have the IRS note on paper that I owe them nothing.

With this law, an erroneous IRS decision can limit passport issuance and
international travel. Three letter agencies are probably salivating at the
prospect of 'errors' in possible suspects. This just unjustly empowers the
government.

~~~
duxup
I've had a couple run ins with the IRS as well where they thought I retired
(nope) or did something I didn't do.

It was pretty easy to resolve by paper for me, couple letters back and forth,
but yeah it takes a while. Fortunately the IRS was good about it all.

I wonder though if they're still investigating (sending me letters and I am
responding) if it counts as owing them as far as this law goes?

From what I remember from he letters provided by the IRS, if I'm responding
with legit responses (I sent them the not correct paperwork a few times and
they were still ok with that) they consider the matter in one phase, but if
I'm not it goes to another phase. It would make sense (hopefully the law does)
that provided I'm responding and the IRS is cool with my responses that I'm
not subject to the law.... but if I'm not responding then maybe the law takes
effect?

~~~
refurb
That’s what I’ve heard as well. Continue to engage the ITS and they are pretty
reasonable and it takes time for them to enact any penalities.

Ignore them? They drop the hammer pretty quickly.

~~~
ta1234567890
I've had some close encounters with both the BOE (California's tax agency) and
the IRS.

Both operated pretty similarly, basically assuming we owed taxes unless we
could prove otherwise (which is technically illegal since they have the burden
of proof initially). They accused us with no proof, to intimidate us into
handing over documents which they then used to build their case against us.

Lawyers and accountants only offered to "negotiate" installments as the only
help they could provide (and charging $$$$).

In the end we won both times by researching the law, past cases, internal
procedures, filing FOIA requests, gathering evidence and responding
accordingly. In one instance they were being super unreasonable and
unresponsive until we filed a request to go to court, at which point they
became much more amicable and willing to "solve" our case.

INAL, but if I had to deal with this stuff from the beginning again, knowing
what I know now, I would not hand over any documents until it gets to the
point where they either drop the case or make a tax assessment that allows me
to request to go to court. At that point they don't have anything, I have all
the documents and I know I've done nothing wrong.

It's a stressful strategy to execute (nobody wants to have a tax agency going
after them), but probably the cleanest.

------
pembrook
Have a feeling this will end up extorting American expats and people who grew
up abroad without ever living or working in the US (who are only US citizens
because of their parents).

When FATCA was passed, it flipped a switch that automatically made tens of
thousands of people around the world who have never set foot in the US into
criminals by default since they'd never filed US taxes (the US has the only
global taxation system in the world).

It sounds like those people who haven't spent the ridiculous sums of money on
accounts/lawyers/etc needed to become compliant during the grace period will
likely now have the threat of their passport being revoked held over their
head.

I'm sure we'll see the already record-high numbers of people renouncing their
US citizenship accelerate. BTW, the US also has the highest fee to renounce
citizenship in the entire world, it costs $2,350 to _not_ be a US citizen.

The absurdity of it all would be funny if it weren't so cruel.

~~~
duxup
I wonder how likely it is people would renounce their citizenship.... that US
passport / citizenship is pretty powerful.

~~~
nradov
During the past few years under 10,000 US citizens have renounced their
citizenship per year. So basically negligible as a percentage of the
population.

~~~
pembrook
The point is not that the absolute number is high or that it has any net
effect on the number of American citizens.

The point is that the number sky rocketed from basically nobody to thousands
of people because FATCA is such a draconian, terrible law.

In absolute terms, only about 3.5% of Americans even travel abroad each year
let alone _live_ abroad. We could put a wall around the entire country and
refuse to let anybody leave and a majority of Americans would not care. A
majority of American citizens don't even have passports in the first place.

The small minority of people who live and travel abroad perform a very
important function for US industry and international relations. Making life
more difficult for them for no good reason is bad for our economy.

~~~
duxup
"skyrocketed" relative to thousands really still seems very small....and we
don't know what each reason is.

------
git_rancher
This makes the whole US a debtors prison of sorts. Not sure if this is a
useful way to think about it though.

~~~
V-2
Technically the US doesn't prevent you from leaving the country for not having
an American passport - it's other countries that are likely not to let you in.

~~~
fooker
The airline is unlikely to let you board, so there's that.

~~~
V-2
But that's between you and this private company :)

Plus, I think at least part of the reason why airlines would be reluctant to
board you is exactly that - knowing that the destination country wouldn't be
happy with them dropping you at their doorstep with no passport in hand. What
would they care otherwise?

~~~
fyfy18
This is exactly it - the airline is responsible for returning you home if you
are denied entry to a country.

My wife used to work as an air stewardess, and one of her longer flights was a
16 hour non-stop flight from Dubai to Brazil. This involved a 3 day layover,
and on the inbound flight she saw some (rather tired) passengers who had been
on the outbound flight.

Apparently they were denied entry, however it was too late for them to go back
on the same aircraft, so they had to wait in the airport (airside) for the
next flight.

~~~
V-2
Right, so that goes back to my original point - it's other countries not
letting a passport-less person in. The airlines have no other choice but to
accept the fact.

~~~
chrismcb
An airline denied my passport (had gone through the wash) I had just returned
from Canada and had used the passport, in the same condition, in the country I
was going to. But the airline didn't care. They said they could be fined
$25000 for bringing a passenger without a valid passport plus they would have
to return me.

------
onetimemanytime
So "John" owes over $51K to the IRS but simply doesn't have the money or
assets to pay. $51k may seem like a lot but it isn't when considering many
years, penalties, fees and interest. So, is he condemned for life to never
travel outside USA to visit ailing mother and so on? Or just apply for
humanitarian exception passport and hope?

~~~
adventured
No, not condemnded to life. IRS back taxes have a ten year statute of
limitations (from the point of assessment). Formally they call it the
collection statute expiration date (CSED). They can't collect after that. If
you owe the IRS Wesley Snipes / Willie Nelson type money, they will typically
sue you in court however (which can effectively extend the ten years by
generating a suspension of the countdown).

~~~
perl4ever
For practical purposes, less than 10 years.

Googling[1] suggests that the IRS has 3 years to audit you and ask for more
money in general, and 6 years if the amount of income omitted is >25% the
income you reported.

This seems eminently reasonable to me. Just don't _lie_ to them and you don't
have to live in fear of making a small mistake.

[1][https://www.thebalance.com/irs-statute-of-
limitations-319294...](https://www.thebalance.com/irs-statute-of-
limitations-3192947)

~~~
masonic

      3 years to audit you
    

3 years _after you file_. The clock doesn't start until you file a return.

------
amaccuish
What was that about how awful it is that China stops people with debts from
leaving?...

------
yani
I am wondering how is this an incentive to pay outstanding taxes.

~~~
yani
To answer my question, it is intended for expats living abroad.

~~~
T-R
Which is doubly disgusting, since the US is one of the only countries that
double-taxes its expats.

~~~
pokemongoaway
Exactly! And then spend barely any of that tax money on what real Americans
want!

~~~
T-R
To the extent this comment can be construed as anything but content-less
partisan dog-whistling, it's pretty off the mark here. Obnoxious as this
particular measure is, it was passed as part of the funding for a, relatively
speaking, bipartisan infrastructure bill focusing on highways and rail. It's
hard to imagine what "real Americans", whoever that's meant to imply, would
rather it be spent on.

~~~
pokemongoaway
I'm guilty of being obnoxious? It sounds like you could push that slippery
slope until "obnoxious" is simply "any opinion I don't agree with." My comment
quite effectively brings up the issue of majority of Americans not wanting to
pay taxes for most of the things that taxes are actually going to - we are not
being represented effectively. You're the one making this a partisan issue.
Just look at some of the polls - or just how many Americans are using other
country's infrastructures to avoid excessive US taxes. On topic with this
article is the fact that US is collecting taxes worldwide on earnings not even
being made in the US - by people who are merely US citizens and not residents!
If my comment were so contentless, then you wouldn't have the authoritarian
reply that I'm merely whistling for my underclass of "dogs."

------
neonate
[http://archive.is/iC53n](http://archive.is/iC53n)

------
garyvee_
Article without paywall:
[https://outline.com/ALAfkA](https://outline.com/ALAfkA)

------
godzillabrennus
Seems like it only further hinders people from paying back debt. Stupid.

~~~
freehunter
I'm not sure I see how. Seems like a great incentive, actually. Your passport
is about to expire, but you're not going to get a new one unless you settle
your debts.

I doubt people with more than $50k in tax debt are the kind of people who
can't come up with the money, they're just the people who don't _want_ to.

~~~
ci5er
If you live and work overseas, the IRS commonly miscalculates money owed. This
can leave one stranded through no fault of their own and/or seriously
interrupt a career. This law doesn't only sweep up tax evaders...

~~~
mdorazio
How much are you making that a miscalculation leads to an erroneous $51,000
tax bill beyond what you supposedly already paid?

~~~
ci5er
About $120K~$150K depending on the host country and their particular income
tax scheme. Which is not a crap salary, but it's certainly not over the moon
Fortune 500 executive comp either. ($50K is about 1/3 of $150K, which is about
what a W2 employee would pay - 1099 folks would pay a bit more)

There's supposed to be a deduction applied to income taxes paid to your host
country - up to a cap. There are two intersecting curves related to host-
country taxes paid and US income taxes owed minus the exempted part, which I'm
not going to describe here, but through key-entry error or whatever
bureaucratic things that happen in paper-processing-office, it is not uncommon
to get a bill on a year for about that amount. IF their response to your
filing in a year (say 2012) gets lost in the mail and IF the same thing
happens the following year - you can owe $100K (on paper - even though
mistaken), and not even know it.

------
king_nothing
And so the totalitarian demagogue builds their “Berlin wall” to keep citizens
in... anyone crossing will be shot. Any unapproved thoughts or speech will
lower one’s social credit, eventually making them ineligible for travel,
banking, voting, government services, etc... too low and they will be sent to
reeducation camps. Parents and children split apart and sent to concentration
camps. Blaming certain groups for a country’s problems. Where have I heard
this before? hmm.

~~~
dang
Could you please not use HN for ideological flames? It's not what this site is
for.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
rosser
Another (non-paywalled) article [0] on this says they're only denying/not
renewing passports for people with at least $51,000 in tax debt. As such, this
isn't exactly "picking on the little guy", and should probably be considered
in that light. If you have an outstanding tax bill on the order of 1.5x (or
_more_ ) than the _median per capita income_ — if you owe more in taxes than
most people _make_ — that's kinda on you, and I'm really not moved to feel too
badly about the government taking additional steps to recover that.

[0]
[https://www.usnews.com/news/politics/articles/2018-07-06/hun...](https://www.usnews.com/news/politics/articles/2018-07-06/hundreds-
of-thousands-at-risk-for-passport-denial-because-of-tax-debt)

~~~
kybernetikos
America is one of I believe only 2 countries that demand tax on income from
its citizens who live and earn abroad (and who have almost certainly already
paid tax on that income to the country in which they are living).

My understanding is that they won't always even accept a renunciation of
citizenship if they believe you're doing it to avoid paying them taxes.

It's no surprise to me that there are significant numbers of expats with large
unpaid tax bills, possibly from years of working, paying taxes in the country
in which they live but never paying US taxes.

Point being that this is probably not primarily targetting rich people who
aren't paying their share, but people who are paying their share in the
country in which they live and work, but are failing to pay an extra portion
of tax to a country they left years ago.

~~~
mdorazio
And? If you're that invested in another country, give up your US passport and
get one with the new country. Alternatively, work to get the tax laws in the
US changed. It's not like this stuff is a secret - if you want to work abroad
you're going to get double taxed. Not paying the US portion of taxes is
illegal. I don't understand the issue here, maybe you can explain it to me?

~~~
firic
It is not that simple to renounce US citizenship. As op wrote, if they think
that you are renouncing because of taxes, they will flat out deny your
request. Furthermore, changing tax law for an expat is virtually impossible
because it is very hard to vote from abroad, and expats are very diverse so no
one politician would care to represent them.

------
oculusthrift
For everyone freaking out about this consider that half the country doesn’t
owe the irs any money because they make too little. So poor people are by
definition unaffected. In addition, not paying taxes is literally illegal so
not sure why you should be able to blow money on vacations to europe when you
are breaking the law and owe the people of the united states money.

~~~
learc83
>For everyone freaking out about this consider that half the country doesn’t
owe the irs any money because they make too little.

45% of tax filers owe no income tax. That's not the same as owing nothing.
Independent contractors don't have FICA deducted from their paychecks, and
with the rise of gig jobs, there are quite a lot of "poor" people who owe 15%
of their income at the end of the year.

