Will IRS Revoke or Deny a US Passport for FBAR Penalties?
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Can IRS Revoke or Deny a US Passport for FBAR Penalties?
In recent years, the Internal Revenue Service has developed various mechanisms to facilitate tax compliance for US Taxpayers across the globe. When it comes to IRS compliance, there are usually two main aspects to being in the good graces of the IRS: tax compliance and reporting compliance. Tax compliance normally involves a tax debt that a person owes that they may be delinquent on — and the IRS wants to leverage enforcement protocols by dangling the person’s ability to obtain or renew their US passport. On the other end of the spectrum is reporting compliance — which revolves around the timely reporting of various international information reporting forms that are used to disclose overseas accounts, assets, investments, and income, such as the FBAR, Form 8938, Form 3520, etc. And, out of all the different international information reporting forms — the IRS has made the FBAR a key enforcement priority. A common question we receive is whether or not a lingering FBAR penalty is sufficient for the IRS to certify a delinquent tax debt against the person — and prevent them from obtaining or renewing their passport?
FBAR Penalties are Not Tax Debts
Taxpayers who may possibly be out of compliance for FBAR reporting — or may have already had penalties levied against them will be happy to know that foreign banks and financial account reporting on the FBAR (a.k.a. FinCEN Form 114) does not qualify as a tax debt sufficient to impact a passport.
As provided by the IRS:
What tax debt does the IRS not certify to the State Department?
Some tax debt isn’t included in seriously delinquent tax debt such as the Report of Foreign Bank and Financial Account (FBAR) penalty and child support. Also not included are tax debt:
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Being paid timely with an IRS-approved installment agreement,
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Being paid timely with an Offer in Compromise accepted by the IRS or a settlement agreement entered with the Justice Department,
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For which a collection due process hearing is timely requested regarding a levy to collect the debt, and
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For which collection has been suspended because a request for innocent spouse relief has been made.
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Also, the IRS will not certify anyone as owing a seriously delinquent tax debt:
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Who’s in bankruptcy,
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Who’s identified by the IRS as a victim of tax-related identity theft,
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Whose account the IRS has determined is currently not collectible due to hardship,
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Who’s located within a federally declared disaster area,
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Who has a request pending with the IRS for an installment agreement,
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Who has a pending Offer in Compromise with the IRS, and
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Who has an IRS accepted adjustment that will satisfy the debt in full.
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The IRS will postpone certification while an individual is serving in a designated combat zone or participating in a contingency operation.
FBAR/FATCA Amnesty Program Summary
The FBAR/FATCA Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting. Some of the more common programs include:
Begin Filing FBAR/Form 8938 in the Current Year?
No, unless the current year is the first year you had an FBAR/FATCA Reporting requirement. Otherwise, if you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as a Quiet Disclosure. The IRS has warned taxpayers that if they get caught in an FBAR/FATCA Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.
International Tax Lawyers Golding & Golding Represent Clients Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure. Contact our firm today for assistance.
