#usexpat

On December 4, the United States dramatically increased the consequences of tax non-compliance when President Obama signed into law the Fixing America's Surface Transportation Act (the "FAST Act"). The statute includes a provision placing at risk the holding of a US passport for any American taxpayer with “seriously delinquent tax debt”. You are considered to have “seriously delinquent tax debt” if the IRS has assessed a tax liability exceeding USD50,000 (adjusted each year for inflation) and where a notice of lien has been filed or levy made.

Of course, US$50,000 sounds like a large amount of money to many, until you understand that there are many international reporting requirements for taxpayers.  Specifically, the Internal Revenue Service can impose a penalty of US$10,000 for each violation of failing to complete and file various information forms, even if no income taxes are owed.

The statute does provide a safe harbor for certain taxpayers, including those who are paying their tax liabilities in a timely manner under an installment agreement or offer-in-compromise. Individuals serving in a combat zone or contingency operation, as defined in section 7508 of the Code, are exempt from certification.

I had been hearing of situations (some from clients and potential clients) where the question of the potential for the linking of tax compliance and US passport renewal was raised. It seems we have an answer to that question, at least for the circumstances covered in this new legislation.