Credit here goes to an unnamed (by request) source who set me on the trail of this topic. A full version of the following report, with documentation, can be viewed at USxCanada InfoShop. [To avoid hassles of reformatting this complex item for a different WordPress theme.]
As the United States attempts to enforce tax and reporting compliance on millions of its extraterritorial citizens, a great majority of them presently noncompliant, what tools can it exercise?
• Threats embodied in voluntary disclosure programs since 2009, with related FBAR penalties
• Future financial institution reporting through FATCA to match against what extraterritorials as individuals have or have not reported
• New annual tax reporting starting with 2011 on Form 8938 of non-U.S. financial accounts, duplicating FBAR
• Passport issuance and border examination of travel documents
This report focuses on steps being taken to make use of passport data.
At present the citizenship functions of the U.S. Dept. of State are quite separated from the revenue functions of the U.S. Dept. of the Treasury (the FBAR agency) and the Internal Revenue Service (IRS). The Foreign Affairs Manual of the State Department makes clear this separation as related to the matter of issuing Certificate of Loss of Nationality: “Consular officers no longer obtain tax information from renunciants” [7 FAM 1243 c].
In the case of passports, this separation of function may be about to cease. On 26 Jan 2012 — less than a month ago — the Federal Register published a “notice of proposed rulemaking.” The effect of this new rule is that all extraterritorials who carry a U.S. passport would also become an IRS file. And IRS can enforce on SSN while Dept. of State cannot: “The IRS may impose a $500 penalty amount on any passport applicant who fails to provide the required information.”
[ Body of report omitted. ]
It seems likely that tax non-compliant U.S. citizens will face increasing difficulties in travelling to the United States. By extension, persons seen to be U.S.-born will likely face corresponding challenge to demonstrate their status if they are not travelling on a U.S. passport.
The U.S. passport seems destined to become a tax enforcement tool, an unsurprising complement to FBAR and Form 8938 and FATCA.
[ Documentation omitted. ]
I thought this was already going on for some time. I know of people who have been questionned at the border about their taxes and the Homeland person at the passport booth seemed to have access to IRS information. Caveat: Homeland is Dept of Justice, not State!
To be honest, all of the direct threats that they could use against me would have no effect: inability to visit the US, refusal to issue a US passport, etc. They got me with FATCA. I can’t maintain normal banking services in my home country. If FATCA didn’t exist I probably would have just (foolishly) ignored having US citizenship and not have done anything about it. Instead of scaring me into compliance for life they’ve just convinced me to do the opposite with FATCA: sever all ties. I bet that lots of other people in my position also would have done nothing but are now being spurned to act due to FATCA. Well done, USA.
If anything I owe a big thank you to the US Congress, because they have awoken me to the dangers of holding US citizenship before I have begun to accumulate any assets through their passing of FATCA. For this I am thankful I guess..
I’m in the same position as Don. I know that they US is doing what they think is best to keep resident Americans from hiding money overseas. It’s unfortunate that we have to suffer too. I’ve just resigned to the fact that I must renounce US citizenship this year and apply for citizenship where I live. I will be stateless until my citizenship is granted, but to me, it’s worth it to longer have to deal with rules from a far-away country where I don’t live anymore.
Here is an interesting chronology outlining the use of SSNs as identification tools: http://www.ssa.gov/history/ssn/ssnchron.html.
My staunchly republican grandfather (who was incidentally penalized by the IRS in the early 1960s whilst working in France as an American) always vehemently maintained that the government said the SSN was never to be used for identification purposes. So much for that idea!
@geeez Don’t be stateless – it’s a terrible idea. At the end of the day the problems we’re discussing are First World problems. The worst-case scenario as a stateless ex-American looks something like this:
– The country where you live deports you to the United States (the State Department warns this can happen)
– The US puts you in an ICE detention facility and, since there’s nowhere to deport you to, you rot there for the rest of your natural life.
see also:
http://www.homelandgitmo.com/faq.php
http://www.villagevoice.com/2003-08-26/news/the-death-of-basil-cuffy/
http://bit.ly/xT9skK
@A broken man, they don’t deport people with Brazilian kids. In all my time here, I have only heard about a drug dealer that deported at the US’s request. He also had a $6 Millions dollar reward on his head. I’m not a criminal, just an ordinary law-abiding person, so I’m not worried about it.
@Don – strangely enough I feel the same way. Threats of not being able to travel to the US are pretty useless in my case. Yes, I like to go to Seattle and visit the farm but last year I went to Budapest, Casablanca and Shanghai and that was way more fun. 🙂
The last of my grandparents died not too long ago. I’m down to very few friends in the area. My parents travel a lot – my Dad has a consulting company and is more often outside the US than not. And finally my aunt is Canadian and has lived in the Vancouver area for nearly 30 years. If travel to the US is out then we just head up to her ranch for a family reunion.
Only sticky thing in this would be required travel to the US for business but that is rare for me since I only ever worked for one French company that had subsidiaries in the US.
Yes, the kicker really is FATCA in this case.
And a confirmation pops up a week later from broken man on a Halifax pier who reports 22 Feb 2012 at Pearson preclearance being asked about tax filing on the basis of US birthplace while travelling on a US passport. Want to get a pool going on how long before someone reports this happening with a US birthplace on a Canadian passport?