270 thoughts on “Passport Revocation: The new weapon in the US war on Americans abroad”

1. Renounce, ignore, or comply.

   Those are the three courses of action which may help a USC avoid getting unnecessarily screwed by the US tax system.

   Renouncing is not available to a USC who can’t afford the fee or needs the US passport

   Ignoring is also not a practical option for all, especially since FATCA descended.

   For some, especially a USC who has no other citizenship and is seeking another, compliance may be the best course.

   If a USC feels that none of the three options is available to him, I would suggest he should think again, lest his fate be determined by others. It might be better to choose the least worst option.

   However, it’s up to each person to make such decisions for himself.

2. That, actually, is a pretty good summary. But all three come with costs and dubious benefits, depending on circumstances. Additionally, the cost of any may be greater than one can afford regardless of the situation.

3. “That, actually, is a pretty good summary. But all three come with costs and dubious benefits, depending on circumstances. Additionally, the cost of any may be greater than one can afford regardless of the situation.”

   Yep. That’s life.

4. No, it is not life. An existance, perhaps, but not a life. Especially if none of the three “solutions” are workable for you.

5. I said:

   “However, it’s up to each person to make such decisions for himself.”

   And not assume that others ought to somehow make it all better for you. Especially when you’re so snotty to other people, and dismissive of their problems.

6. “And not assume that others ought to somehow make it all better for you. Especially when you’re so snotty to other people, and dismissive of their problems.”

   Yep, you leave a hell of a lot out. A lot that is of great importance to anyone in specific positions. Additionally, creative use of certain words such as “cooperate” really display a complete lack of understanding of certain situations.

   I do not assume that others should make my situation better, but they should not impede efforts to improve the situation of people in my situation. Nor I do not take kindly to any belittling of my situation.

7. Possibly helpful for someone else who may be reading though. That’s who I’m talking to.

8. Why be so exclusive and leave out those in situations similar to my own?

9. “Why be so exclusive and leave out those in situations similar to my own?”

   I have been trying to understand what the US aims to get out of CBT and FATCA. It’s hellish confusing but I have now realised (or concluded) that they see the right to be taxed as an American as a US citizens en privilege which is open to abuse. They’re simply not trying to make expats pay US tax on non-US income.

   It’s FATCA that’s the problem.

   That’s what I’ve been interested in, and slowly working my way through. If what I’ve said helps anyone else, that’s great as far as I’m concerned,

10. It is a lot simpler than that, just listen to want FATCA’s supporters say about it and consider the financial situation in the US that prompted FATCA. They are broke, need cash to pay for the promishes they used to buy votes and know that if they raise taxes much more, those votes ll disappear.

    I agree, FATCA is the big problem. FATCA is what has made CBT and FBAR issues for the USC abroad. Without FATCA, those too were largely meaningless, so much so in the case of CBT that most USCs still do not know about it.

    It is FATCA that greatly increases our exposure to ID theft and other issues due to loss of finacial privacy.

    But to advocate compliance without informing the reader of the IRS effectively Doxing everyone who does comply or advocating not filing while not informing the reader of the potentially great risks of having their FIs sending info to the IRS that differs frim what thry themselves send to the IRS is irresponsible.

    Yes, each individual must make the decision for themselves, but they can not make an infirmed decision if not informed of the risks or the risks downplayed or worse as happens, those who try to inform of the risks are mocked. Think of “Informed Consent”.

11. I think that we’re actually pretty good about informing readers of the risk/reward calculation for any of the the three options. Here quickly are the negatives of each, as I see them:

    Renounce: possibly not be let back in to the US; potential costs of exit tax compliance if one does wish to comply; potential (but unlikely) grief of some unknown kind if one chooses to renounce without complying; US$2350 price tag.

    Comply: costs in time and money of filing; costs of actually owing the US money in certain circumstances; potential fines as a consequence of making an error (I suspect that the fear of this is greatly overblown, thanks to condors); inability to take full advantage of some residence-country investment/retirement schemes if attempting to be compliant; future appearance of some hideous new tax that makes everything worse.

    Ignore: possibility that US would look at FATCA data and decide to dig deeper into why there were no returns; problems after returning to the US one day in the future; not possible to sponsor a spouse for green card; otherwise, crickets…

    I make no mention of banking or employment restrictions etc. because those are FATCA problems, not US tax problems. I also make no mention of information security, identity theft etc. because I don’t know enough about it to make an informed judgement. (The less you send the IRS, the better, I suppose.) Mark that down as an additional risk of unknown magnitude for anyone attempting compliance or subject to FATCA reporting.

    The calculation of risk depends on each individual’s situation, of course. I (and others) have been quite clear that the most vulnerable people are US expats with no other citizenship, due both to collection agreements in a handful of countries, and now the threat of passport withdrawal. (Hence my earlier asinine point that one should try to avoid being in that situation.) At the other end of the scale, accidentals with citizenship in their country of residence are completely immune to any US threats with respect to taxation, though FATCA can make their lives miserable if they have a US birthplace and happen to live somewhere like Switzerland.

    As for passport revocation, of course it’s a grave risk for those who need their passport to survive. What we don’t know yet is how the IRS will deal with someone non-compliant but subject to FATCA reporting. Technically it’s possible they could generate a substitute return and lay on a bunch of fines and pull a passport. Technically it’s possible they could take away the passports of every US citizen reported under FATCA whose taxes are not perfectly in order. Is that likely to happen? I suspect not, but nobody knows for certain. It’s an existential question for some, not for others. (Duals tend to react with “Please take mine – it’s cheaper than renouncing!”) Right now it looks like they’re starting to send out letters, but only to people who have existing unpaid debts and with whom they’ve already been in communication – it’s just another club they can beat you with. Or they may use it like FBAR penalties today, an additional tool with which to threaten those who they think they have a reasonable chance of collecting money from, but not a blanket fine imposed on everyone who files late.

12. “Think of “Informed Consent”.”

    Nope. Think of figuring out what the situation is and communicating it and others can decide for themselves whether they agree with what I say, and if some find it helpful, that’s great.

13. @plaxy

    ““Think of “Informed Consent”.”

    Nope. Think of figuring out what the situation is and communicating it and others can decide for themselves whether they agree with what I say, and if some find it helpful, that’s great.”

    By leaving out what you do, you help lead people to uninformed decisions.

14. @nononymous

    “Renounce: possibly not be let back in to the US; potential costs of exit tax compliance if one does wish to comply; potential (but unlikely) grief of some unknown kind if one chooses to renounce without complying; US$2350 price tag”

    Only one side of the coin and putting the cart before the horse at the same time. One must first determine if they can meet the requirements for citizenship of the new country before even looking seriously at this option, or they are just wasting their time, like I did.

    “potential fines as a consequence of making an error (I suspect that the fear of this is greatly overblown, thanks to condors)”

    Condors played no part in my fear of fines. A threatening letter from the IRS accompanying my tax return form and instructions was more than enough.

    “Ignore: possibility that US would look at FATCA data and decide to dig deeper into why there were no returns; problems after returning to the US one day in the future; not possible to sponsor a spouse for green card; otherwise, crickets…”

    This is one of the more bizarre assertions. “Possibility” that the US would look at FATCA data and dig deeper? If the US does not, what then is the purpose of FATCA?

    “I make no mention of banking or employment restrictions etc. because those are FATCA problems, not US tax problems. I also make no mention of information security, identity theft etc. Mark that down as an additional risk of unknown magnitude for anyone attempting compliance or subject to FATCA reporting.”

    And it are these problems that snare almost everyone, whether they actually owe tax or not. This is the nuke used to swat gnats. These are the issues that will destroy even those who somehow figure out how to comply perfectly with all the IRS and FBAR laws, regulations and rules. They destroy the innocent as thouroughly as those truely guilty of various tax crimes. The exact magnitude of these differs on the situation but not at all diffucult to get a grasp of. Lots of cases of people who have had their IDs stolen to see what going through that is like. We can also easily learn rough figures for how many people have their data compromised and what the IRS response has been to date, not good. Then add the complications of living abroad with these problems and trying to solve them from afar across different juristictions and we can easily arrive at the fact that the risk is similar to allowing the town druggies to maintain the spare keys, labled with name, address, phone number, work and vacation schedules of everyones’ home. What could possibly go wrong.

    Leaving these out is also leaving out one side of the coin. Much like a doctor discussing possible treatments without telling the patient of their known bad side effects. Then, of course we have the fact that despite your aknowledged ignorance of these threats, you brush off mention of them as exaggerations.

    Leaving these out also gives a sense of false security to those who fit the cases where you say they need not worry. It also leaves out all the innocent victims of FATCA, denies our existsnce and leaves those who may be able and interested in helping fix this mess the impression that it is just as it was sold, common sense neasures to catch tax cheats. A disservice at best.

    “(Hence my earlier asinine point that one should try to avoid being in that situation.) “

    Yes, asinine. One can not “post avoid” anything. Warnings to avoid marrying a USC are meaningless to those already wed to one. Warnings to not get a green card are meaningless to those that already have one. Warnings to not spend extended lengths of time in the US are meaningless to those who have spent large portions of there lives there. Warnings to avoid being born in the US, yep them to, meaningless. Warnings to not live in countries where gaining citizenship is difficult to those who already have a decade or more of time in such a country and have families of locals is meaningless. Asinine.

    “Duals tend to react with “Please take mine – it’s cheaper than renouncing!””

    Yep, that is exactly how I would react, if I were a dual. But I am not. Somehow, I doubt that I am the only nondual USC living abroad.

15. “Renounce, ignore, or comply.

    Those are the three courses of action which may help a USC avoid getting unnecessarily screwed by the US tax system.”

    Except of course for those who renounce AND comply and still get screwed. I still don’t think I’m the only one who the IRS’s Taxpayer Advocate was talking about in her report to Congress in 2011.

    If you comply, you’d better not tell the truth. Fabricate a return that will be processable.

16. “I have been trying to understand what the US aims to get out of CBT and FATCA.”

    Penalties. We’ve known that for years.

    Mr. Dewees didn’t owe any actual tax to the US.

17. “I make no mention of banking or employment restrictions etc. because those are FATCA problems, not US tax problems.”

    Banking restrictions are FATCA problems but employment restrictions are FBAR problems.

    “Technically it’s possible they could take away the passports of every US citizen reported under FATCA whose taxes are not perfectly in order.”

    They could take away the passports of every US citizen by alleging that taxes are not perfectly in order regardless of what the facts are. The latest news, as I quoted yesterday, is that the IRS will not allow the facts to be presented in Tax Court.

    “Right now it looks like they’re starting to send out letters, but only to people who have existing unpaid debts and with whom they’ve already been in communication”

    ALLEGED unpaid debts. In a collection case, if there was no preceding Notice of Deficiency, the person can present facts and the IRS can concede 100% of the penalties after calendar call in Tax Court. In a passport revocation case, the IRS will prevent this.

18. This thread is getting tired and cranky. Time to put it to bed

19. I swear I won’t say another word. Time for fresh air, vigorous exercise, reading novels by the fire, general wholesomeness.

20. @Portland

    With all due respect, I believe this arguement is of great importance especially to those who are just finding out about CBT, FATCA and FBAR. I doubt that I am the only one seemingly trapped in a position that could have been easily avoided if only I had known that any of this mess was even possible. But people are not likely to avoid what they want to do unless there are very good reasons to do so. I personally know many individuals who even now dream of getting a green card or give birth in the US so that their child will be a dual USC. They are not going to change their minds if the reasons to do so are continually labled as unlikely or exaggerations.

    We have individuals here who on one hand say avoid certain things but on the other say the reasons for doing so are exaggerated. Are we hoping to make people more aware of the dangers FATCA, FBAR and CBT or confuse them about why they should or should not avoid certain sotuations? If the former, then they must have access to as much information as possible. They need to know both what the law says and how it is being carried out in the real world. The only way for them to know what is likely to happen in the cuture is to have a good understanding of how this all came about and what changes have occured in the recent past.

    That the conversation gets “cranky”, well, how would it not when those that read about it discount those who are living it? But what use is it to anyone that either or both these points of view and experiences be silenced?

21. I said:

    have been trying to understand what the US aims to get out of CBT and FATCA.

    Norman Diamond said:

    Penalties.

    If both assessable and collectible.

    Mr. Dewees didn’t owe any actual tax to the US.

    None that was assessable as due for the year in which his OVDP bill was being calculated. Tax on the earnings of the [CFC] corporation would be treated as deferred until repatriated.

    They could assess FBAR penalties but couldn’t collect them, and couldn’t ask Canada to collect them.

    They could (and did) assess 5471 penalties, and they could (and did) ask Canada to collect.

22. “have been trying to understand what the US aims to get out of CBT and FATCA.”

    ‘Penalties.’

    “If both assessable and collectible.”

    Did you forget that we’re talking about the IRS? They can[*] collect even if they didn’t assess and even if a court ordered them not to collect.

    But sure, when they can’t[**] collect, they can’t[**].

    ‘Mr. Dewees didn’t owe any actual tax to the US.’

    “None that was assessable as due for the year in which his OVDP bill was being calculated. Tax on the earnings of the [CFC] corporation would be treated as deferred until repatriated.”

    If repatriating means moving money to the US which is not moving back because it was never there in the first place, I bet that would have been never. Of course last year’s job cuts and tax act deems more nonsense than what Dewees had to contend with.

    “They could (and did) assess 5471 penalties, and they could (and did) ask Canada to collect.”

    Which I still think CRA shouldn’t have cooperated with, since the penalties weren’t based on tax when he didn’t owe any tax, despite the contortions a US judge produced. Nonetheless, yes the US was able[*] to collect because CRA cooperated.

    [* For a definition of “can” which depends on some kind of ability other than legal ability.]

    [** Where legality might or might not play a role; for example when CRA won’t help collect from people who had Canadian citizenship at the time of … of some event involved in the run-up to the allegation that something is owing, though now I’m not sure which kinds of events qualify.]

23. ND:

    “Did you forget that we’re talking about the IRS? They can[*] collect even if they didn’t assess and even if a court ordered them not to collect.”

    Nonsense. They can’t collect unless they can collect.

    “If repatriating means moving money to the US which is not moving back because it was never there in the first place, I bet that would have been never. Of course last year’s job cuts and tax act deems more nonsense than what Dewees had to contend with.”

    But may have to contend with now, if he still hasn’t got Canadian citizenship, still has his corporation, and is still filing US tax forms including 5471s.

    “Which I still think CRA shouldn’t have cooperated with, since the penalties weren’t based on tax when he didn’t owe any tax, despite the contortions a US judge produced. Nonetheless, yes the US was able[*] to collect because CRA cooperated.”

    The treaty doesn’t say that the requested State can refuse to assist in collection of penalties for failure to file information forms. The US can’t collect FBAR penalties because that’s not covered by the treaty. It’s not because residence countries consider FBAR penalties unjust.

24. Deeees was badly advised, at a time when he was suffering traumatic family tragedy. His case is not an example of the IRS successfully exercising extraterritorial power to impose US taxable; it’s merely a demonstration of what is now – too late for Dewees – well understood: trying to comply is the riskiest of the three options.

    Not everyone has the option to renounce. Dewees surely could have got Canadian citizenship and shed the US citizenship, if he had been clearly informed of his options.

    Sad, and unfair, but not a demonstration of US extraterritorial power.

25. Neither is the case of Boris Johnson. Again, looks like he was either badly advised or didn’t have any advice. I think he voluntarily paid in the end because he needs access to the USA. Then he renounced.