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FAST Act Give IRS Power to Revoke Passports for Tax Debt over $50K

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Irs Passport Revocation

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Key Takeaways

  • The recent passage of the FAST Act has some people worried about their ability to travel and live abroad because of their IRS liabilities.
  • As such, many Americans, both domestic and living abroad, are left wondering what the consequences of the new measure will be and how the government will enforce these new provisions.
  • Carve-outs in the law exist at the Secretary of State level for emergency situations or humanitarian objectives, but not for economic hardship or any other considerations.

The recent passage of the FAST Act has some people worried about their ability to travel and live abroad because of their IRS liabilities. Although Congress has long toyed with the idea of tying tax compliance to international travel privileges, the new law now codifies the ability of the government to restrict passports of anyone who owes the IRS more than fifty thousand dollars in outstanding and unresolved tax liability.

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Delinquent FBAR Submission Procedures

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Delinquent Fbar Submission

Delinquent FBAR submission procedures

Key Takeaways

  • On the cover page of the electronic filing, you will be required to select from options as to the reason for the late filing.
  • The IRS will not impose a penalty for the failure to file the delinquent FBARs as long as you properly reported the income on your U.S.
  • The audit process with regard to FBARs is similar to the selection process in place for tax returns.

Some taxpayers may not need to use the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedure options, but still may have a delinquent FBAR or Foreign Bank Account Report. FinCEN has established a procedure to address this problem.[1]

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Opting out of the Offshore Voluntary Disclosure Program – Part One

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Key Takeaways

  • [1] National Taxpayer Advocate report: https://www.taxpayeradvocate.irs.gov/userfiles/file/FullReport/IRS-Offshore-Voluntary-Disclosure-Programs-Continue-to-Burden-Benign-Actors-and-Damage-IRS-Cred…
  • [2]IRS memorandum regarding guidance for opting out https://www.irs.gov/pub/newsroom/2011_ovdi_opt_out_and_removal_guide_and_memo_june_1_2011.pdf  

Opting out of the offshore voluntary disclosure program can be a difficult choice. An opt out is an irrevocable election made by a taxpayer to leave the safe harbor of the OVDP, and have his or her case handled under the standard audit process. This is different from removal, which is a determination made by IRS personnel to remove a taxpayer from the civil settlement structure of the OVDP because the taxpayer or taxpayer’s representative has not cooperated. The IRS has recognized that there are cases were opting out may be the better approach for the taxpayer. In these cases, the results under the OVDP are too severe given the facts of the actual case. If the violation was not willful and there is a low exposure for criminal penalties to the taxpayer, the standard audit procedure may result in a lower monetary penalty making opting out of the offshore voluntary disclosure program logical.

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The OVDP Process – Part Four

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Example of the Penalty Structure in the OVDP Process

Key Takeaways

  • Under the OVDP Process
  • Outside the OVDP Process
  • Case Resolution in the OVDP Process

The Criminal Investigative unit is charged with assessing the penalty structure. The structure itself is nonnegotiable and the examiner lacks discretion to make any adjustments. The following is an example prepared by the IRS[1]:

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The OVDI Process – Part Two

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The OVDI Process – After Preclearance is received

Key Takeaways

  • The OVDI Process – After Preclearance is received If a taxpayer makes all the requisite disclosures and receives the preclearance then they must make their disclosure.
  • Taxpayers or their representatives should mail their “ Offshore Voluntary Disclosure Letter ”[2] and “ attachment ”[3] to the following address:
  • Internal Revenue Service Voluntary Disclosure Coordinator 1-D04-100 2970 Market Street Philadelphia, PA 19104

If a taxpayer makes all the requisite disclosures and receives the preclearance then they must make their disclosure. Note these guidelines are subject to change. Consult the IRS’s website for the most recent OVDI procedures. [1] Under the IRS’s guidelines:

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The Offshore Voluntary Disclosure Process – Part One

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Key Takeaways

  • (b) Identifying information of all financial institutions at which undisclosed OVDP assets were held.
  • (d) Executed power of attorney forms (if represented).
  • Have more questions regarding the Offshore Voluntary Disclosure process?

The precise procedures under the Offshore Voluntary Disclosure process are murky at best. They resemble loading a revolver and handing it to someone with an itchy trigger finger. As other countries and their foreign financial institution buckle to the pressures of FATCA, the value of self-disclosure is beginning to lose its luster to the federal investigators. The lack of precise protocols and standards can only be an indication of the fact that the Offshore Voluntary Disclosure rocess will have a short life as foreign compliance escalates and the Streamlined programs are taken advantage of those whose conduct was non-willful. Under the current regulations, what is in it for the taxpayer according to the IRS:

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Streamlined Offshore Voluntary Disclosure Penalties

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A Summary of the Streamlined Offshore Voluntary Disclosure Penalties

The Title 26 miscellaneous offshore penalty is equal to 5 percent of the highest aggregate balance or value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period. For this purpose, the highest aggregate balance or value is determined by aggregating the year-end account balances and year-end asset values of all the foreign financial assets subject to the miscellaneous offshore penalty for each of the years in the covered tax return period and the covered FBAR period and selecting the highest aggregate balance/value from among those years.

Key Takeaways

  • A Summary of the Streamlined Offshore Voluntary Disclosure Penalties
  • Streamlined Offshore Voluntary Disclosure Penalties – Miscellaneous Offshore Penalty
  • Streamlined Offshore Voluntary Disclosure Penalties – Retroactive Relief

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