Tax-evading Americans could lose their passports

DUBAI American citizens who have not paid their taxes could stand to lose their passports from next year, a leading US tax expert has cautioned.

Dubai-based Andrew Landin, managing director at Expat US Tax, told XPRESS: “The US Congress is in the process of enacting legislation which will give the American government the authority to deny or revoke US passports when US taxes have not been paid.”

He said the legislation may become effective from January 1, 2016 and will apply to cases where the unpaid taxes, interest and penalties total more than $50,000.

“It should not apply to cases where the unpaid taxes claimed by the Internal Revenue Service (IRS) are in the process of being resolved by the taxpayer. So it is important for US passport holders to be up-to-date with their filing of US tax returns and the payment of US taxes,” he said.

Under US law, American citizens are required to file tax returns with the IRS every year even when they are working outside the US. They may also be required to file annual foreign bank account reports with their government. Over 40,000 Americans are estimated to be residing in the UAE.

Landin said: “Passports are important for people when living and working outside the US. They are necessary for travel, visas, housing, banking and schooling. Living and working abroad can be completely disrupted without a US passport.”

Under the circumstances, the proposed move to revoke passports is expected to leave Americans with no choice but to become tax compliant. According to western media, 1,577 Americans renounced their citizenship at US embassies worldwide in the first half of 2014, ahead of new asset-disclosure rules introduced in July last year to clamp down on tax evaders.

Landin said there could be scenarios where the IRS has sent letters claiming there is an unpaid tax liability and the taxpayer has not received the letter. “The mailing address may have changed, the IRS may not have been notified of the change or the correspondence may have been lost in the mailing process. It will be very important for US passport holders to ensure that they have an up-to-date mailing address and to monitor any correspondence from the IRS.”

He said the US State Department has announced another change for American passport holders from next month. “After December 31, 2015 it will no longer be possible to have additional pages added to a US passport. If US passport holders run out of unstamped pages in their passports, they will now have to apply for a new passport, as additional pages will no longer be added to existing passports. New US passports can be requested with either 28 pages or 52 pages.”