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Traveling with tax debts? Maybe not, thanks to this new rule

On Behalf of | Jan 20, 2018 | International Tax Law |

If you have tax debts, you probably want to figure out how to get out of them at the least cost to you. If you don’t address the debts, you could find yourself in trouble with the Internal Revenue Service.

In July, there was a report specifically aimed at passport holders with tax debts. These individuals need to make sure they get their taxes in good standing. Why? The IRS is starting to take note and enforce compliance.

Why is the IRS looking at people with passports?

The IRS is concerned about the amount of money it’s losing as a result of the international tax gap. When U.S. taxpayers live overseas, they may not report their incomes, file returns or pay taxes. The IRS wants to see that come to an end.

To reduce the number of people failing to file or pay, the IRS used the Foreign Account Tax Compliance Act, or FATCA, which had a goal of encouraging appropriate filing when living overseas.

In 2015, the IRS gained significant new powers. Now, with the government’s help, the IRS can restrict the passports belonging to people who owe significant tax debts. That rule wasn’t expected to start until 2017, and as of January 2018, is in effect.

How can you avoid having your passport restricted?

You can avoid restriction by making an arrangement with the IRS to pay your debts or by having your attorney look into ways to reduce your debt liability and to have it discharged. If you retain a debt with the IRS and haven’t created an agreement, you could find your passport is restricted in the future. This law only affects those with tax debts of $50,000 or more and for which the IRS has established a lien or levy.

Taxes are complicated, and even if you live overseas, you still have to file. Don’t fall into this trap. Make sure you set up an arrangement if you’re behind on your taxes.