Terry Ritchie tweeted this earlier today. It tends to confirm fears about information sharing between agencies and how it may complicate things at the border. It would appear this exchange will happen only if an actual tax lien has been filed; I would suspect this won’t apply to the majority of us.
The IRS has established procedures to facilitate tax collection from taxpayers who live outside the United States. If a taxpayer has an unpaid tax liability and is subject to a resulting Notice of Federal Tax Lien, the IRS may submit identifying taxpayer information to the Treasury Enforcement Communications System (TECS), a database maintained by the Department of Homeland Security (DHS). The database allows the DHS to identify taxpayers with unpaid tax assessments who are traveling to the United States for business, employment, or personal reasons (Internal Revenue Manual (IRM) §188.8.131.52). As a result, taxpayers traveling to the United States with unpaid tax assessments increasingly are being detained at the border.
Again, the expectable swerve around any possible privacy issues:
Information reflected in a Notice of Federal Tax Lien, which may be entered onto TECS, includes the contact information for the individual and the amount of the unpaid tax. Taxpayer information may not be disclosed to TECS without a properly filed federal tax lien because Sec. 6103 protects taxpayers from improper disclosures of their tax return information. As a general rule, returns and tax return information are confidential and may not be disclosed to federal or state employees or agencies unless expressly allowed by statute.
Sec. 6103 does not specifically authorize the disclosure of return information that already is part of the public record. However, the U.S. Supreme Court ruled in a line of cases that there is no reasonable expectation of privacy for matters that are part of the public record. See Nixon v. Warner Communications, Inc., 435 U.S. 589 (1978); Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975); and Craig v. Harney, 331 U.S. 367 (1947). Consequently, the IRS takes the position that the disclosure of information taken from the public record is not an unauthorized disclosure under Sec. 6103. Under this position, information reflected in a properly filed Notice of Federal Tax Lien is part of the public record and may be submitted to TECS without violating the disclosure laws.
Observations by the editor, Annette Smith:
IRS disclosure of taxpayer return information to the DHS through TECS can have broad consequences. The IRS relies on the general proposition that taxpayer return information that is part of the public record is not subject to disclosure limitations. A withdrawal or release of the lien, and certain other prerequisites, are required for removal of the taxpayer’s information from TECS (IRM §184.108.40.206.5.4). Thus, the lengthy process to remove information from TECS may result in detention at the border for travelers to the United States for a period of time after the lien has been released or withdrawn.
A taxpayer who resides outside the United States may not be aware of outstanding federal tax liabilities if the address on record for the taxpayer is outdated or otherwise incorrect. Consequently, tax advisers with clients who reside outside the United States should ensure that the correct address for the taxpayer is used on the client’s returns and, if the client no longer is required to file U.S. returns, that the IRS still is able to contact the taxpayer about previously filed returns. Taxpayers should be advised that the failure to keep the IRS apprised of a change in mailing address may result in an unwelcome, and potentially embarrassing, surprise from the DHS when the taxpayer seeks to enter the United States through Immigration and Customs Enforcement.
Having just read swisspinoy’s post Day One: Filing Previous Year Tax Returns with all the confusion about addresses, I shudder to think of how likely it is, that information sharing between agencies will turn into a huge disaster.
Homeland Security May Contact U.S. Persons Living Abroad Who Owe Back Taxes
What a bureaucratic nightmare this will be.
The only way that this could work, would be for individuals to have their own IRS web accounts that they could log into to check their status, address, etc. Yet, this would mean that the IRS would no longer be able to detain people at the border if they checked their status in advanced. With the $20 billion that the IRS already spent, one would think that such would already be available.
The pessimist in me says that, if anyone still holds out any hope that citizenship based taxation will disappear from the U.S., it would seem that based on the ever tightening of the tax oppression net that your hope is in vain?
You’d definitely be better off to relinquish/renounce rather than face this gauntlet of tax bureaucrats for the rest of your life and most likely your heirs also after your death.
Phil Hodgens is our guru.
Get out while the getting is semi-good.
As a result, taxpayers traveling to the United States with unpaid tax assessments increasingly are being detained at the border….
now the question I have is detained and denied entry or detained and arrested ? One is embarrasing and inconvenient, the other one is disasterous.
Furthermore, for anyone who was a former USC and is no longer one, does that mean we have to update the IRS for the remainder of our lives if we move, just to make sure that the US can contact us in perpetuity (and at their whim)?
I know an Indian couple (here in Canada) who had received green cards in the early ’90s. Turns out they ended up remaining here, and did the whole oath-out process many years ago. Every time they cross the border they are detained and checked out before they enter.
@recalcitrant – I have no hope whatsoever that citizenship-based taxation will disappear.
and as usxcanada reminds us of Phil’s comment -I got out while the getting is semi-good. Sounds like a good jingle for an expat anthem….
@recalcitrantexpat, @nobledreamer, I don’t know if the bill I’m writing to end US citizenship-based taxation will get anywhere, but I’m going to try as I have nothing to lose (besides time).
I found two other countries that abolished citizenship-based taxation: Mexico in 1980 (effective 1981) and Vietnam in 2007 (effective 2009).
Mexico (in Spanish): http://www.bibliojuridica.org/libros/5/2489/8.pdf (page 277)
Translation: From 1981, a radical change occurs regarding the criterion of binding [a person to a country]. The criterion supported by many countries to tax people according to their residence was adopted in Mexico with the purpose of modernizing its regulations. The criterion of nationality is abandoned, and from now on the residence and the location of the source of wealth will be the determining elements as the subject of tax.
Vietnam (in English): http://www.loc.gov/lawweb/servlet/lloc_news?disp3_l20540388_text
According to ACA (http://americansabroad.org/issues/taxation/history-of-us-taxes-abroad), the Soviet Union also taxed its citizens regardless of residence, until it was dissolved in 1991.
In the case of North Korea, when the government sends workers abroad to work in a foreign company, the salary is paid directly to the North Korean government, which retains most of it and only pays a fraction to the workers (http://ajw.asahi.com/article/asia/korean_peninsula/AJ201206250084). This sounds more like slavery to me, but since there is no tax for work done outside this arrangement (in case a North Korean is able to escape the country and work abroad independently), I wouldn’t say North Korea applies citizenship-based taxation. It’s something else, even though it’s worse.
Kenya makes it hard for its citizens to terminate residence, but officially it only taxes the foreign income of residents (http://www.diasporamessenger.com/index.php?option=com_k2&view=item&id=628:tax-amnesty-for-kenyans-in-the-diaspora&lang=en).
Some people mention that Libya taxes its citizens abroad, but at least since 2004 it doesn’t (http://www.temehu.com/tax.htm, article 64). I couldn’t confirm whether it did earlier.
Due to a treaty, France taxes the income of its citizens who reside in Monaco (http://www.impots-francais-de-monaco.com, in French). Monaco doesn’t have income tax.
So the last countries to abolish citizenship-based taxation are:
Soviet Union (dissolved) 1991
Only the United States and Eritrea remain.
Anyone within OVDI or coming forward wanting to become tax compliant should be concerned about any disputes arising with the IRS during either process. Fortress America is only going to make more ostriches if it means entry denied!
*@newb, rest assured that even if you have a CLN in hand and attempt to enter the US even though you have an outstanding tax debt with the IRS that somehow was overlooked when you renounced, or which te IRS discovered you had subsequent to your renunciation and having received your CLN. YOU WILL BE DETAINED. You are a criminal tax evader and tax evaders will be placed under arrest if they set foot on the US side of the border.
The law is very clear: Renunciation of citizenship in no way frees you from any US tax obligations which you have. Immigration will place you under arrest. It is then your problem to prove you are not guilty.
Just ask some of the Swiss citizens who were transiting and changing planes in New York when flying from Switzerland to Mexico. The made the mistake routing their flight to Mexico via the United States, rather than via Madrid, London, Havana or some other non-US city.
@shawdowraider- Thanks for that research. It certainly puts things in perspective. It is one of America’s saddest ironies that it alone, of the developed countries, which are its peers, that it is now exiling and jailing its own citizen over their refusal to allow the U.S. to tax another country’s treasury.
Russia and China may have fairly clear cases of political corruption but in the case of America its corruption is more opaque. Being shrouded under the veil of American Exceptionalism coupled with the unstated but now explicit expectation of its citizen’s perpetual allegiance to the Father land.
Shadow’s post is quite long. I can’t wait to read it. Just to play the DA here, people are crossing into US TERRITORY so the US can do whatever they want to do. It’s the extra-territorial overreach that I don’t like. But whatever they do on their turf is fine by me because I don’t live there.
Haha, the pessimism about abolishing citizenship-based taxaton. I’m also in the same boat. Unless Stephen Mopsick or the ACA can actually get something done, I’ll have the take the oath eventually…
*@Shadoraider; Cuba also collects the salaries of Cuban doctors who have “volunteered” for service in Venezuela. Only a portion of what Venezuela pays actually ends up in the pockets of these volunteers. Part of it is utilized to pay Venezuela for the petroleum it exports to Cuba which is sold at a very preferential-below-world-market-price.
When my wife and I visited Cuba as part of an 8-person mission group from our church a few years ago, the pastor of the Cuban church we were visiting told me that several members of that church, who were medical doctors, were serving in Venezuela. I asked him if they volunteered for that work. His diplomatic reply was “not exactly.”
They were, in effect, “volunteered” to go to Venezuela for the purpose of producing hard-currency earnings for the Cuban Treasury. Very similar to the situation in North Korea.
Your mention of N Korean doctors reminds me of something I heard during the uprising in Libya
‘North Korea has banned its citizens in Libya from returning home in an apparent attempt to prevent the popular uprisings in the Arab world from reaching the isolated regime…’
‘North Korea has banned its citizens in Libya from returning home in an apparent attempt to prevent the popular uprisings in the Arab world from reaching the isolated regime…’
Roger, it’s reported that Brazil gave $600 million to Cuba last year in “aid”. Brazil is starting to send a lot of money outside of the country, especially to the countries into the CLP countries (Portuguese-speaking countries). There’re benefits for both sides. We all speak the same language so that helps. But WHAT IF one of these countries that was receiving aid or capital ended up on the US “pp” list, and/or the US wanted to lash-out at Brazil for sending this money to Cuba or other countries like Mozambique, Angola. Guiné, among others? The last thing I can actually control is how Brazilian politicians spend/send their surplus cash. I only had a blue passport until a few years ago, and when I arrived, my Portuguese was pessímo!
I guess what I’m saying is relinqishment/renunciation is an “insurance policy” against things that are uncontrollable for me like US Foreign Policy. Taxes are just unavoidable. I’m not saying this to be P/C; here with the consumption taxes and VAT taxes it’s impossible to not pay.
It’s the irrational decisions that come from nowhere (the US) that I fear the most.
Roger, it’s a shame you had to leave here. The society has its flaws, but it breeds a certain “tolerance” for most things that I wish existed in the Northern Hemisphere, but it doesn’t unfortunately.
Nowhere is equal to the next place, nor is the next place equal to the previous.
Roger, according to two Brazilian doctor-friends, the only nationality of doctor that can practice medicine in Brazil with few questions asked are CUBAN doctors. The rest can go fly a kite.
Rest assured, I think not. lol. Your words are very true, I am sure.
Essentially this means that even if we are tax compliant (a floating definition in IRS terms and dependent on their economic situation) up to the very moment of our renunciation (which I am, as far as I know), we must continually check in with the IRS to make sure they aren’t opening up a cold case and going to hunt us down and find that we owe them something in hindsight. And furthemore, we must keep updating our contact information with them to make sure that if they find something for the remaineder of our life, they have a way of finding us to let us know.
@Roger, Thanks for the information about the Cuban doctors, it seems similar to the North Korean case. But at least officially, Cuba does not tax nonresidents. It also specifically exempts from tax the remittances from family members abroad. I suppose that the case of Cuban doctors is different because they are under an arrangement with the Cuban government. So I wouldn’t say Cuba has citizenship-based taxation.
Source, in Spanish: http://biblioteca.idict.villaclara.cu/UserFiles/File/CI%20Disciplina%20fiscal/85.pdf
Translation of relevant section: Nonresident persons are not subject to taxation.
Anyway, it looks like citizenship-based taxation (or something similar) is a trait of communist or very authoritarian countries. I wonder if US congressmen are aware of this.
*@geeez, we absolutely loved living in Brazil and it was with great reluctance that I returned to the US when President Ford signed the Tax Reform Act of 1976 which increased my combined US + Brazilian income tax to 81% more than any Brazilian or non-US citizen foreign resident had to pay on exactly my same income and with my same family situation. I feel very much “at home” whenever visit Brazil. Such a welcoming nation for others probably doesn’t exist anywhere in the world.
You may be aware that the Florida legislature has recently passed and the governor signed a law which prohibits the government of the State of Florida or any minicipality or other government entity in the State of Florida from “doing business” with any corporation which has subsidiaries or affiliated companies which are doing business in or with Cuba.
Odebrecht,the large Brazilian contracting firm, with which Miami-Dade County and Miami International Airport have signed contracts falls within the scope of prohibititions of this new legislation, so this is a subject of hot controversey here in Florida. I believe that Odebrect has, if I am not mistaken, filed a lawsuit to have this law declared unconstitutional because it has a subsidiary which is currently executing a contract with the Cuban Government to rebuild the port installations at Mariel, Cuba. What the outcome of this will be I have not a clue.
The Cuban exile community in Miami has a strong voice. Although it was some 50 years ago, they remember well and will never forget when the Revolutionary Government of Cuba seized their hardware stores, grocery stores, farms, sugar plantations etc. and from one day to the next they were transformed from owners of familhy businesses, some of which had been in their families for generations, in to “employees” of these now Government owned businesses. The family managers were replaced by militant members of the Cuban Communist Party. There was no compensation and they were fortunate to be able to leave Cuba with just the clothes on their backs. When they left all their money, rings, watches, etc. was confiscated when the boarded the flight to Miami.
On Augus6 6, 1960 Fidel Castro announced to a cheering crowd in the Havana Sports Statium that he had “Nationalized” the American-owned $132 million Cuban Telephone Company, the $267 million American-owned Cuban Electric Company and the $81 million United Fruit Company. A total of some $2 billion in US owned properties were nationalized that day.
Then a few months later when the Government took over all Cuban-owned businesses, thus eliminating all private enterprise, the cheering was considerably more subdued. Instead you could hear a pin drop.
*@Shadow Raider, you are correct, Cuba does not tax non-residents. Their doctors in Venezuela are government employees. Their services are sold to the Venezuelan Government and then the doctors are paid a fixed salary as determined by the Cuban Government. It is not an income tax.
As far as I know the only nations today that practice citizenship-based taxation are the US and Eretreia. Do the Congressment know this? Probably all of them do, but they could care less. After all the US is the most powerful nation in the world and it does not look to other countries to determine how it should levy and collect taxes.
@Roger, The US does look to other countries sometimes. For example, in 2005 the Supreme Court ruled that the death penalty for those under 18 years old is cruel and unusual punishment and thus unconstitutional. To consider whether it was unusual, the court argued that, at the time, the US was the only country in the world that still allowed the execution of minors, and that it was one of only two countries that had not ratified a UN convention against it (the other country was Somalia, which has no effective government).
In the area of taxation, the Republicans now say that the US is the country with the highest corporate tax rate in the world, and that it should adopt a territorial system of taxation for corporations like the rest of the world does.
Would the IRS pursue a non-compliant USC who files abroad differently than a non-compliant USC who lives in the U.S. (and believe me, lots of USCs who live in the U.S. aren’t up to date)? If a non-compliant USC who resides in the U.S. took a holiday to Mexico or something, and then returned home, would they not be arrested upon entering the U.S.? Probably not. How would that be different than a USC who lives in Mexico coming to the the U.S. for a 1-week trip?
I guess what I am saying is that the IRS, according to its rules, must pursue all non-compliant USCs, whether or not they live in the U.S., and that our international address (and citizenship) doesn’t make us any different than someone who lives in the U.S…. and those non-compliant USCs who reside 365.25 days of the year in the U.S. do travel abroad and still get to come back to the U.S. without arrest. Overall, why would the U.S. treat non-compliant USCs who live abroad any differently than non-compliant USCs who live in the U.S? This new communication may exist between the IRS and DHS, but then non-compliant USCs are in the same boat, whether local or not.
@ShadowRider, That’s great info! It could almost be a post of its own. Thanks for sharing.
*@Shadow Raider, it was in fact the bipartisan Simpson-Bowles comission, made up of both Republicans and Democrats, appointed by President Obama. known as the National Commission of Fiscal Responsibility amd Reform that recommended that the US adopt a Territorial Tax System, in line with the other countries, leveling the playing field. But both the president and Congress totally ignored the recommendations of this Commission which published its report in December 2010 . They met for weeks to hammer this out, but they might just as well have spent their time playing golf.
If a Notice of Federal Tax Lien is a matter of public record and hence not protected under US privacy legislation, according to the Supreme Court, then where exactly is this public record? It seems to me that, rather than having to file changes of address to the IRS, anyone should be able to search a public record of such liens for their own name to see if they have a problem. If they can’t do that, in what possible common-sense interpretation of the English language is the lien a matter of public record?
A quick search on Google uncovered the following Yahoo thread, which suggests that in fact there is no such public record on the Internet (other threads disagree, see below). Assuming the thread is correct, then how in Hades can these liens be considered a matter of “public record.” What record, where, how public??
Another website seems to imply that the only way to find a public record of a tax lien (by the IRS or by any state government) would be to search the land or deed registry in your present or former state and county of residence to see if a lien has been placed on your property there (if you have any, but most folks on IBS probably don’t). But that won’t work for most people on IBS, I suspect:
As others have suggested above, realistically this may not likely be something most folks with a CLN are going to need to worry about, whether it’s a renunciation (you’ve filed an 8854 probably and if there’s any dispute over it, you’ll hear about it at the address you provided when you renounced) or a long-ago relinquishment (assuming they think you owe taxes from way back then and are going to bother you about it, you’re past the statute of limitations of ten years and/or you never owned any property they could have put a lien on, anyway, and/or you’ll hear about it from them at the address you provided when you filed your Form 4079 at the US Consulate). So if there’s a lien problem for you, you’ll know about it, and it shouldn’t be a big surprise for you at the border.
Or am I, as a simple lay person, missing something that only arcane legal-beagles can be expected to understand?
@Schubert, thanks for these comments. Shouldn’t a taxpayer be able to contact the IRS to find out if there is a public lien? Or will they hide this from you? Or should we just assume that if there is an outstanding unpaid bill that the IRS will put a public lien on you? It is like an APB, it seems now that they are connecting it to DHS:
The good folks at the IRS have wonderful lawyers who are able to split hairs. They have a problem of inter-agency information sharing barriers. They’ve found a work around. What this means is that you could have a public lien against you and detained at the border. Can’t it be simpler? It means you can be a subject of unpublished public notice, and not know it. Best to make sure that the IRS doesn’t think you owe them something, before entering the US. They think I owe them $3K+. They may put a lien on me soon because I ain’t paying it.