• expatriation (as in giving up U.S. citizenship); and
• cleaning up paperwork problems for undisclosed bank accounts.

Offshore Bank Account Cases

I have done a LOT of work in the “clean up the undisclosed bank account” arena. I commend to you an article published today, titled “The OVDI Drudgery for Minnows.” What the author says is 100% true. This is from a tax practitioner (that would be me) who has handled many, many dozens of cases with the IRS and has advised an undisclosed but much, much larger number of people to find alternate ways to handle their affairs. I am very expensive. I suspect other tax lawyers experienced in this arena are also very expensive. Part of the expense is due to the difficult work, but his point about drudgery — endless hours grinding through the paperwork — is also spot-on.

FWIW I now only take on offshore disclosure cases with EXTREME reluctance. The absolute poop (this is an item of technical tax jargon and is somewhere in the Internal Revenue Code, I just can’t put my finger on it right now) the IRS put my clients through has utterly soured me on the experience. It chewed up Life Credit Units for me as the lawyer, as surely as it chewed up Life Credit Units for the clients.

My suggestion to those of you out there in the real world — first, get experienced, competent advice to decide whether you have a money problem or a jail problem with the IRS. It is well worth over-paying for that kind of advice.

After that, if you don’t have a jail problem I would be extremely reluctant to consign myself to oblivion as defined by the IRS’s now semi-permanent voluntary disclosure program. I am writing this blog post from the Al Faisaliah Hotel in Riyadh. U.S. persons living abroad almost cannot help but screw up one obscure IRS paperwork problem or another and thus risk massive penalties. But give the IRS 27.5%? NFW.

I must say that many OVDI cases that have opted out are being dealt with sanely. Some not.

I don’t want anymore of these cases. I know people. Call me and I will refer you to them.

In the meantime, read The Isaac Brock Society to get some education.

Expatriation

The reason I am in the Middle East is to talk to people about canceling their U.S. citizenship. Massive, massive interest in this.

Again, The Isaac Brock Society website is extremely useful. I especially like the first-hand reports of the exit interviews at different Consulates. This will really help you to know what to expect when you show up at an Embassy or Consulate to renounce citizenship.

Logging out of the citizenship/permanent resident status is the easier part. The tax part is more complex. For most of the authors who tell their stories on www.isaacbrocksociety.com I suspect they don’t have complex tax issues to solve when they expatriate. Our office more often than not lives squarely in “complexity” land.

Anyway

I’m out of here. Headed up the road to see a friend who’s office is across from the Jarir Bookstore on Olaya Road here in Riyadh. I’m back in the office next week.

Carry on.

Hello to “Just Me” and Petros of The Isaac Brock Society.

From: “Vancouver, ACS Department” <vancouveracs@state.gov>
Date: November 8, 2011 7:47:00 AM PST
To: FirstName LastName
Subject: RE: CLN forms – FirstName LastName

There is currently a back-log in respect of Loss of Nationality cases.  Cases are responded to by turn.  We request your patience.

U.S. Consulate General
American Citizen Services
Vancouver, BC, CANADA

Privacy/PII|
This email is UNCLASSIFIED.

Do not expatriate by mail

If you want to terminate your U.S. citizenship before the end of the year:

Make an in-person appointment at an Embassy or Consulate.

Do not mail in your application to terminate citizenship.  Do it in person.

If I could put twinkle stars surrounded by rainbows to draw your attention to those two sentences, I would.  I’m just not that good at HTML.

You can go to any Consulate or Embassy in the world.  It is worth buying a cheap ticket to fly somewhere to do this.  Make it a vacation — go to Singapore or Bangkok or Frankfurt or somewhere else.

There is no guarantee that you will have your application processed before year-end.  When you mail the documents to the Embassy or Consulate you do not know whether they arrived in good shape.  By setting an in-person appointment, you will know for a fact that you terminated your citizenship on a particular day.

Even if your documents arrive by mail, and the Consulate acknowledges receipt, you face a second risk.  If your documents were mailed and were incomplete, they will be rejected and you will have to start over.   If you made a mistake on your paperwork, you can fix it on the spot if you are sitting in front of the Consular official.

Commentary — keep an open mind

I get the feeling that the number of people terminating U.S. citizenship has jumped dramatically.  I wonder whether the U.S. government publishes statistics on this.  Yes, I know that there are quarterly statistics for people expatriating under Section 877A, but I question whether those are complete and accurate.

Regular people who do not live in my world (international taxation) are flabbergasted when I tell them that U.S. citizens are turning in their passports right and left.  It is simply inconceivable that someone would do such a thing.  Sometimes the reaction turns to an implicit character assassination of the person relinquishing citizenship:  they must be a bad person in some way.  Tax dodger.  Non-patriot.  Someone unwilling to support his country.

Meh.

It is more interesting to me to watch the outbound flow of intellectual (and financial) capital in a semi-scientific way and formulate a hypothesis.  Why are these people choosing to terminate citizenship of the most powerful country in the world?  Keep an open mind.  Formulate a testable hypothesis.  Adjust it when the data indicate the hypothesis fails.

Me?  I know what they tell me.  Multiple anecdotes don’t create a data set.  But I hear them again and again report:

• The current jack-boot tax enforcement attitude of the IRS scares them.  Many of the people we help expatriate settle in countries with higher tax rates than the U.S.  It is not the rate of tax that matters.  It is something else.  Can you guess, Mr. Shulman?
• The estate tax.  The funny (as in “it is a monument to towering stupidity”) thing about expatriation is that people who do so cannot allow their capital to return to the United States after death because of the exit tax rules — Section 2801.  So the U.S. government drives capital out of the United States and then creates economic disincentives for that capital to return.  Makes sense.  We don’t need investment capital in the United States.  We have too much real estate already.  We don’t need investors.  Or jobs.  We have plenty of jobs already in the United States.  Go away with your silly investment capital.  Our banks are fine.
• The hassle of pointless paperwork.  Unlike other countries, the United States imposes income tax on its citizens no matter where they live.  Even if there is no tax imposed (because, for instance, the host country has a higher tax rate than the USA) there is a paperwork burden and the opportunity for screwing things up accidentally.  And then, please cross-reference my first point re:  jack-boots.  Oh.  And look at the constant threat that Congress will do away with the foreign earned income exclusion.  Yet more Towers of Stupidity from our friends in Congress.
• They’ve put down roots (or have roots) in another country.  Non-tax reasons exist.  After living abroad for decades, people finally decide that the United States is no longer home.  Or they came to the United States from another country and find the United States no longer hospitable, and prefer the home country to the USA.  My parents are immigrants, and they decided that their home countries are no longer home–the United States is home.  The reverse happens, too.  Especially with Canada, in my experience.

Canary, meet coal mine

At the moment the number of people leaving might be small, and their actions dismissed in a hand-wavy fashion.  But they should not be dismissed.  Their actions are an indicator of something gone awry.

The United States has been built on immigration.  Out-migration tells us something isn’t working.  (Hah.  Tell that to the State of California. “Oh, no. Everything is fine!”  Same thought.)  When people vote with their feet — and are willing to pay a staggering tax to do so — they are sending a message.

I don’t think anyone is listening.  And this, unfortunately, is to the greater harm of the United States.

It’s difficult to make a man understand something when his salary depends on him not understanding it.

Upton Sinclair in I, Candidate for Governor: And How I Got Licked (1935), ISBN 0-520-08198-6; repr. University of California Press, 1994, p. 109.

No, he wasn’t really talking about the IRS. But he could have been. If you screw up filing a piece of paper and the IRS has the power to fine you $10,000, it is exceedingly difficult for everyone in the IRS — from the Commissioner on down — to understand why this is a bad idea.

If you are an Accidental American who has lived most of your life in Canada and you don’t file a piece of paper with the U.S. government, it is exceedingly difficult for the Commissioner to understand why claiming 25% of your RRSP is a bad idea.

I am an accidental U.S. citizen, having been born in the United States while my mom was visiting there.  Never lived or worked in US.  Now I am doing voluntary disclosure. Never knew about filing. Close to retirement.  Is there an exit tax to Canadians born abroad? There was some comment about having to be registered in Canada therefore not considered dual. Canada passed a retroactive law 2 years ago saying that all such babies were in fact considered Canadian at birth. Do you know?

My answer:

From the U.S. side, there is nothing that I know about which gives you an easy “out” from the U.S. tax system.  You have some paperwork ahead of you, I’m afraid.

Assuming you want to cancel your U.S. citizenship in 2011, here is what you need to do:

1. Make sure 2006 – 2010 U.S. Federal income tax returns are on file and up to date and accurate.  (You have to have a 5 year history of tax returns on file).
2. Go to the Embassy or a Consulate before year-end and give up your citizenship in a small bureaucratic ritual.
3. For 2011, file your final U.S. income tax returns along with Form 8854.  Your final tax returns for 2011 will be Form 1040 (the U.S. resident tax return) for the time until you cancelled your U.S. citizenship, and Form 1040-NR for the remainder of the calendar year.  And did I say Form 8854?  Don’t forget Form 8854.  ;-)

You might have to pay the United States an exit tax for the privilege of cancelling your U.S. citizenship.  Or you might not.  This is something I can tell you after we talk and I get specific details about you and your situation.

The “all such babies born abroad are considered Canadian at birth” idea you’re talking about probably was a (sane) Canadian legislative reaction to the (koo-koo) U.S. exit tax law.

For someone who is a U.S. citizen AND was also a citizen of another country at birth, there is a way to give up U.S. citizenship without paying any U.S. exit tax.  You still have to do all the paperwork described above, thought.

The Canadian Parliament was probably hard-wiring the “You’re a Canadian at birth” idea into the Canadian legal system so there would not be any ambiguity for purposes of the U.S. exit tax.  If your Canadian politicians were thinking that way, they get bonus points for foresight.

Bad position to be in.  Good question though.  It’s worth a blog post.  :-)

Keep in touch.  If I can help you, please let me know.

Thanks for the question!

(Insert routine lawyer disclaimer/pre-emptive strike/waiver/advance repudiation here — I’m not your lawyer, you’d be a damn fool to believe everything you read on the interwebs, go get some smart professional to advise you, etc. etc.)

Phil, enjoy your blogs they are very informative and funny at the same time. I would really like to know if a Canadian born American is subject to the exit tax if they have never lived or worked in the US.

Thanks in advance.

Yes.  You have to go through the exit tax processes.  The fact that you have that magic U.S. passport is enough to cause that unfortunate result.  You may be able to get out of paying any exit tax, but you will still have to do all of the paperwork and filing requirements — five years of up-to-date tax returns in the United States and the Form 8854.

Here is how it works.  A U.S. citizen who gives up citizenship is an “expatriate” for purposes of the exit tax rules.  So for you that is unavoidable.  With “expatriate” status comes a job of doing a lot of paperwork.

But what you really want to do is avoid “covered expatriate” status — this is where you have to do paperwork AND pay tax to the USA when you give up your citizenship.  You may be able to do this.

A quick excerpt from the Exit Tax book that I’m writing now (shameless pimping on my part!):

Regardless of your financial status, you are not a “covered expatriate” if you satisfy all of the following items [see Section 877A(g)(1)(B), Notice 2009-85, Section 2(B)]:

• You became a U.S. citizen at birth; and
• You also became a citizen of another country at birth; and
• On your expatriation date you “continue” to be a citizen of that country; and
• On your expatriation date you “continue” to be taxed as a resident of that country; and
• On your expatriation date you were not a U.S resident for 10 of the 15 tax years that end with the year that you expatriated.

Note, however, that you will still have to certify that you are up to date with all U.S. tax requirements.  Failure to do so will render you a covered expatriate even if you satisfy all of the dual citizenship requirements.

Your action plan should be:

1. Make sure you have five years of clean U.S. tax returns on file with the IRS already. E.g., if you give up citizenship in 2012 be sure that 2011, 2010, 2009, 2008, and 2007 U.S. tax returns are all hunky dory.
2. Make sure you fit within this exception to “covered” expatriate status.  This answer won’t necessarily be obvious or easy.  But it might.  E.g., what does it mean to “become a citizen of another country at birth.”  What if you didn’t qualify for that citizenship until your parents did a bunch of paperwork for you which they got around to doing when you were 15 years old?
3. THEN AND ONLY THEN give up your U.S. citizenship.
4. Do your “year of expatriation” U.S. income tax returns plus Form 8854.
5. Throw a party for all of your friends.

I hate to ask a stupid question but IRS Notice 2009-85 gave me brain freeze. If your assets consist of property in the US and you sell all the property and pay the proper tax to the IRS before leaving the US, is there another tax or “exit fee” on the net amount received for the property on top of this or on any money removed from US banks upon leaving the US? Thanks.

Section 877A

We are in the land of Section 877A — the law that applies to U.S. citizens and green card holders who give up their citizenship or permanent residence visas.

• Not every person who gives up a passport or green card is going to file some paperwork with the IRS to log out of the U.S. tax system.
• And not everyone who gives up a passport or green card is going to pay tax because of this tax law.

Let’s assume M is in the unfortunate position where she must do the paperwork and she will have to pay a tax when she gives up her citizenship or green card.

Simple Example of the “Exit Tax”

The phrase “exit tax” is sloppy, informal tax lawyer slang. So it is easy to get confused if you don’t know what those teenage delinquents — that would include me, international tax lawyer extraordinaire — are talking about.

The “exit tax” is the regular income tax applied to special people, but at an earlier date than would otherwise be the case. The special people are those who give up their U.S. citizenship or green cards.

Example

You bought Google stock for $300/share and now it is worth $400/share. If you remained a U.S. citizen or green card holder, you would only have to pay tax when you actually sold the stock.

On the other hand, if you give up your U.S. citizenship or green card, you have to pay tax on your $100 profit as if you sold your stock the day before your “expatriation date.” (“Expatriation date” means the the day on which you gave up your citizenship or green card. Another piece of jargon!)

It is the same tax amount that you would pay if you had chosen to sell the stock voluntarily. It is just a question of timing and the event that triggered the tax.

Paying the tax on your Google stock because you gave up citizenship or green card status — this is part of what we refer to as the “exit tax.”

Once you have paid the “exit tax” (either in a giant lump sum up front, or because of the 30% withholding made on payments as you receive them) you have cash in your pocket. The IRS will not tax you a second time. You are free to move about the planet.

“Exit Tax” Consists of Several Things

The phrase “exit tax” that we use consists of four different ways in which you pay tax when you give up U.S. citizenship or green card status:

• Mark-to-market. The example I gave above is technically–and correctly–defined as capital gain tax (the regular kind) on mark-to-market gain. Simply put, the IRS pretends that you sold everything you own on the day before you gave up your citizenship or green card. You did your “pretend” sale at market price. (Hence the phrase “mark-to-market”). You pay tax on the capital gain on “pretend” capital gain you received.
• IRAs and other specified tax-deferred accounts. There is a whole zoo of little accounts like IRAs in the Internal Revenue Code. Political boondoggles all. Well-meaning, bleeding-heart, social-engineering boondoggles, but boondoggles nonetheless. The IRS pretends that all of these accounts were completely distributed to you on the day before you gave up your citizenship or green card. Pay income tax at regular tax rates.
• Deferred compensation accounts. These are normal and normal-ish pension plans. If they are “good” deferred compensation plans, the IRS will take 30% of your monthly pension payment as tax, as the distributions are received by you, for the rest of your life. If they are “bad” deferred compensation plans, pretend they dumped the whole amount in your wallet on the day before you gave up your citizenship or green card, and do some complex math. Pay tax.
• Trust distributions. Weirdness. Not important for our purposes here. I will write more about this in some other blog post.
• UPDATE. Gifts/bequests. The sins of someone subjected to the exit tax in all of its glory (a “covered expatriate” is the technical description of that person) are visited upon his/her children. Someone who gives money or leaves property at death to a U.S. heir will also leave that heir with a whacking great big tax bill. (Because why would the U.S. government want capital to come into the USA? It’s not like we need business investment or jobs or anything. . . . Oh, wait. . . . ) (Update to blog post jogged by the comment below; thanks.)

Exit tax — (mostly) a one-time thing

Four very different items, with different tax rules for each. The teenage delinquents international tax practitioners refer to all four collectively as “exit tax.” That’s confusing.

The general idea is that the IRS wants to tax you as you are leaving. The reason they want to do this is because they are afraid that once you are gone you won’t every come back and voluntarily pay tax to the United States government if they can’t force you to do it. That’s why all of your tax is due immediately. The only exceptions are for things like pensions, where there is a pension plan in the United States who can be forced to do tax withholding for the IRS.

Finally, here is M’s answer

In direct answer to M’s question — you will pay tax once and once only when you exit the United States. In most cases it will be in one giant lump in the year that you give up your U.S. citizenship or green card. In a few cases the tax will be imposed by 30% withholdings on payments to you, forever and ever into the future until you don’t receive any more payments (this is for things like pension payments).

And when you have paid that exit tax, there is no further tax imposed when you want to move your cash out of the United States.

No hope for future guidance, I think

This area is fiendishly complex, not because it needs to be, but because of the peculiar way in which Congress conceived (in the “let’s be fruitful and multiply” sense of the word) this law.

Congress wrote a skanky piece of legislation — stupidly conceived (in the thinking sense, not the “let’s make a baby” sense), poorly written, and full of entirely predictable consequences that are damaging economically and diplomatically to the United States. (Can you guess that I have an opinion about this?)

Congress left next to no legislative history. (Legislative history is the stuff that Congress says so you can figure out what their intentions were, so if you find an ambiguity in the law they wrote you can try to reverse engineer the law to achieve the intent of Congress). You can’t look there for help if you’re puzzled.

Notice 2009-85 is, in my estimation, all you’re going to get in this area of tax law in terms of guidance. There may be a few odds and ends of Notices and Announcements from the Service in the future. But not much.

I don’t think you will get Treasury Regulations issued during our lifetimes. The law is messy (so it is a hard job) and the number of taxpayers to whom it will apply is small (relative to the total population of taxpayers). I don’t think the Commissioner will carve off a bunch of brainpower to throw at this problem.

How will you know what the rules are? You won’t.

We do a lot of work with people who give up their permanent resident status or U.S. citizenship. There are a lot of tax hoops to jump through. I often describe the exit tax rules to a new client as if you decide to leave your wife/husband/girlfirend/boyfriend and the spurned significant other proceeds to throw all of your clothes into the front lawn and set fire to them. Hell hath no fury like a Congress scorned. Etc., etc. You have to go through the fire. You’ll live.

But I digress.

I read Hacker News and participate from time to time. I am username “philiphodgen” on Hacker News. Pro tip: if you want to browse Hackernews on your phone, use ihackernews.com. It formats well on an iPhone and on a BlackBerry. I know this from first-hand personal experience on both platforms. iHackernews sometimes breaks when you’re trying to read the comments for reasons beyond the power of its creator to control. But just try again in a little bit and it will work.

I digress. Again.

Through the HN firehose comes an interesting article with a new perspective on expatriation. The author’s thesis is that citizenship is a problem to be solved.

Put down your pitchforks. The point of the author writing an article like this is not to answer with “You’re right!” or “You’re wrong!” The point of the article — and discussing the ideas — is to explore the ideas. There are some important concepts here that transcend taxation, though tax is obviously a prime motivator.

Shipping companies use flags of convenience all the time. I suspect people will start to do this more and more. At the moment this practice is mostly visible with people like Rupert Murdoch. For him — and others like him — it is easy to put on ideological blinders and castigate him. Pointing to his use of citizenships is a convenient club to wield in order to attack him.

Don’t fall for the shallow, reflexive response. Be openminded. For this I commend you to a fine bit of reading, David Foster Wallace’s 2005 commencement address at Kenyon College. Oh, and don’t get me started on a nice little rant about copyright and IP and the “Reality Doesn’t Exist” world that publishers live in. Go see how someone clueless attempted to erase the commencement address from the face of the internet here. Then do a Google search for the commencement address. I think the publisher must have hired Barbara Streisand to enforce its intellectual property rights.

But I digress.

I have heard that there is a two-year wait/processing time to renounce US Citizenship. Is that correct?

Nope.  Not true.

In order to give up your citizenship, you will make an appointment at a U.S. Embassy or Consulate.  You go through an interview and you sign a bunch of paperwork.  Your effective date for giving up the citizenship is that day.  It takes maybe four or five months for the final written confirmation to come back to you by mail.

The hard problem is getting yourself on the calendar at your favorite Embassy or Consulate.  Many have insane calendars–fully booked up, far into the future.  Switzerland is very difficult.  London, too, I’ve heard.  And I’ve heard that the Canadian Embassy and Consulates are clogged.  On the other hand, my recent rumor mill tells me that Frankfurt, Sydney, Singapore, and Berlin are relatively easy to deal with and get on the calendar.

I think the rumor about a two-year wait refers to the time delay involved in getting the appointment on the calendar at a particular Embassy or Consulate.

You are not required to go to the Embassy or Consulate closest to you.  You can go anywhere in the world.

My suggestion:  get on the phone and start calling Embassies and Consulates worldwide until you get yourself an appointment.  Then book a flight and go.

It is amazing how this whole FBAR and taxing situation affects people who have never ever lived or worked in America, and yet they are tangled in its maze, and psychologically impacted…. It is amazing that this poor woman has to even consider these options…

Congress passes ill-conceived laws. There is no question about that. The Treasury Department (of which the IRS is a piece) has the happy job of figuring out how to enforce the mess they are handed. (The fact that the Treasury Department is frequently the source of these ill-conceived ideas in the first place will be passed over without comment.) (Do you see what I did there?)

As I watch the parade of tax legislation (Congress) and enforcement (the Treasury Department, IRS, and Department of Justice) I am more and more convinced that the government actors in this game are oblivious to the concepts of externality (which I learned as an Economics major at Claremont McKenna College) and the law of unintended consequences.

Consider the photographer. Focusing on the foreground renders the background fuzzy and indistinct. So too is it here. By focusing on the immediate — “We have rules! The rules must be enforced!” — the government actors have lost the ability to see the big picture. This woman’s story is one of many of those details. Because her story is lost in the blur, the government officials can pretend it doesn’t exist.

http://www.expatforum.com/expats/canada-expat-forum-expats-living-canada/87344-us-taxation-dual-citizen-renouncing-citizenship-disappearing-us-radar.html

Just like my correspondent, I am amazed that the ripple effects of the government’s war on Swiss banks can reach out this far and torment a regular, ordinary person who probably has never traveled to Switzerland in her life.

The people who work at the IRS are, well, people. On an individual level each would probably be horrified to see this woman’s plight and would want to help if they could. (I know this because one of the individuals at the government who was central to creating much of this avalanche of FBAR hell has been revealed to me to in fact not be a monster but someone who is indeed sympathetic to the plight of ordinary people caught in the IRS’s meat grinder).

Look. The police in my town all carry guns. But they don’t shoot out the tires of your car if your parking meter expires.

Hey IRS! Just because you have draconian penalties on the books doesn’t mean you have to use them. And you don’t have to wave the gun around menacingly and occasionally shoot a driver just to make sure that other people feed a quarter into the meter.

Read (warning:  PDF) “Potential for Using Passport Issuance to Increase Collection of Unpaid Taxes,” GAO Report dated March, 2011.

I quote from the executive summary:

What GAO Found

State issued passports to about 16 million individuals during fiscal year 2008; of these, over 224,000 individuals (over 1 percent) owed over $5.8 billion in unpaid federal taxes as of September 30, 2008. State is not authorized to restrict the issuance of passports to individuals because they owe federal taxes. In addition, federal law does not permit IRS to disclose taxpayer information, including unpaid federal taxes, to State officials unless the taxpayer consents. In contrast, federal law permits certain restrictions on the issuance of passports to individuals, such as individuals owing child support debts over $2,500. For 2008, the estimated amount of unpaid federal taxes is likely understated because it excludes individuals who have not filed tax returns or underreported income. In addition, according to State officials, State cannot compel a passport applicant to provide a Social Security Number (SSN). As a result, State’s records sometimes did not contain a valid SSN, which is necessary to match passport data to IRS data. Also, the number of passport holders and dollars owed only includes 1 year of passports that were issued, substantially understating the total tax debt for all passport holders.

GAO judgmentally selected 25 passport recipients to investigate for abuse related to the federal tax system or criminal activity. Of these cases, at least 10 passport recipients had been indicted or convicted of federal laws. In addition, IRS assessed trust fund recovery penalties on several passport recipients when the individual did not remit payroll taxes to the federal government. Rather than fulfill their role as trustees of this money and forward it to IRS, they diverted the money for other purposes. Willful failure to remit payroll taxes is a felony under U.S. law. Some of these individuals accumulated substantial wealth and assets, including million-dollar houses and luxury vehicles, while failing to pay their federal taxes. At least 16 passport recipients traveled outside the country while owing federal taxes. At least 4 passport recipients resided in another country at the time of GAO’s investigation. Two individuals used the identities of deceased individuals to fraudulently obtain passports and then used these passports to travel to Mexico, France, and Africa. In one case, the unpaid tax debt belonged to a deceased individual, and in the other case, the debt was incurred by the imposter. We referred these 2 cases to IRS for further investigation.

If implemented, the United States will become a nation-equivalent of a company town. We will be indentured servants–we do not have freedom to leave the United States until the fief lord says we can.

The conclusion to the report says:

IRS enforcement of federal tax laws is vital—-not only to identify tax offenders—-but also to promote broader compliance by giving taxpayers confidence that others are paying their fair share. As federal deficits continue to mount, the federal government has a vital interest in efficiently and effectively collecting the billions of dollars of taxes owed under current law. Federal law already allows the linkage of debt collection with the passport issuance process in certain areas, including for certain outstanding State Department debt and child support enforcement. [The "nose in the tent" is usually some variant on the "Think of the children!" theme, just as we see here. Ed.] The question is whether this is a public policy strategy that might have broader application in other areas, such as federal tax debt. If so, legislation would be needed to facilitate screening for outstanding federal tax liability with linkage to the passport issuance process. Such legislation could have the potential to help generate substantial collections of known unpaid federal taxes and increase tax compliance for tens of millions of Americans holding passports. Appropriate criteria and safeguards would need to be developed and applied, such as to ensure individual privacy, minimize undue approval delays, and permit appropriate exemptions. Related programs currently operating can serve as a starting point for such considerations.

Thanks JB for the email.

Conclusions

• This is not the law now, but consider this as an official whack with the cluestick.
• Vote carefully.
• If you’re going to give up your U.S. citizenship, do it sooner rather than later.