By Fiona Moore, for ExpatBriefing.com 02 November, 2017
Americans and prospective US citizens will not lose their right to a US passport for incurring significant penalties for failing to declare a foreign bank account to the Internal Revenue Service, a taxpayer lobby group has said.
Made law in December 2015, the Fixing America’s Surface Transportation Act allowed US authorities to reject a taxpayer’s request for a US passport, or to block the use of a US passport to travel outside the US, where a taxpayer has “seriously delinquent tax debt.”
Under Section 7345 of the Internal Revenue Code, the IRS is authorized to certify a taxpayer’s “seriously delinquent tax debt” to the State Department for action. After certification, the State Department will generally not issue a passport to that taxpayer or “revoke” that taxpayer’s passport, allowing them to only travel back to the US.
From January 2018 the IRS will begin “seriously delinquent tax debt” certifications to the State Department, covering those with tax debts of above USD50,000 subject to certain conditions.
According to a new statement from the lobby group American Citizens Abroad, it has learned in meetings with government representatives that Foreign Bank Account Report (FBAR) reporting violations are unlikely to result in the IRS certifying a taxpayer as having a “seriously delinquent tax debt.” It said it had been pointed out that FBAR penalties are written under Title 31, which is not tax legislation. Tax penalties are written under Title 26, it said.
An FBAR must be filed by a US citizen or resident that has a financial interest in, or signature authority over, a foreign financial account with an aggregate value exceeding USD10,000 at any time during the year. The current penalties are USD10,000 for “non-wilful” violations. For wilful violations, the penalties are USD100,000 or 50 percent of the relevant account balance, whichever is the greater.