Owing taxes to the IRS while living abroad can put you at risk of losing your U.S. passport.
If owe taxes to the U.S. but live abroad, you might not be able to return to the U.S. until you settle your debt with the IRS. In fact, your U.S. passport might be revoked, preventing you from being able to travel anywhere. If you are at risk of losing your passport because of unpaid taxes, file the necessary returns with the IRS and pay what you owe. If you’ve already lost your passport, you can apply for a limited-validity passport for direct travel back to the United States. The IRS provides payment plans for individuals in these situations. To avoid the possibility of losing your passport or owing considerable fines and taxes to the IRS, learn about your reporting requirements before moving abroad.
For help with your taxes while living abroad, call the tax CPAs for American expatriates at US Tax Help at (541) 362-9127.
Can You Return to the US if You Owe Taxes While Living Abroad?
Whether or not you can return to the U.S. when you owe taxes to the IRS while living abroad depends on the severity of your delinquency. This can cause serious issues for expats overseas who might be unaware of their tax liability to the United States.
Expats still need to file annual tax returns with the IRS when living abroad. If they do not, they will be penalized. If you have seriously delinquent tax debt, the Secretary of the Treasury might revoke your U.S. passport, meaning you cannot return home. Generally, this only happens in cases where expats owe more than $55,000 in debt, including interest and penalties.
If you are an expatriate, you might not owe much in taxes to the IRS because of the foreign earned income exclusion. That said, the penalties associated with late filing might put you over the threshold for seriously delinquent tax debt, causing your passport to be revoked. If you are at risk of your passport being revoked, you will likely receive a Notice CP508C by mail. This will be sent to your last known address. If the IRS is unaware of your recent move abroad, you might not receive this notice at your current foreign residence, causing your passport to be revoked without your knowledge.
What if You Owe Taxes and Are at Risk of Not Being Able to Return to the US?
If you have seriously delinquent tax debt and you are at risk of your passport being revoked, preventing you from returning to the U.S., or your passport has already been revoked, there are certain things you should do.
Passport Might Be Revoked
If you recently became aware of your tax liability as an expat living overseas and are concerned that your U.S. passport might be revoked, it is important to settle your debt with the IRS. Start by filing the necessary forms. To use exemptions for expats, like the foreign earned income exclusion, you must file your returns within three years of the return due date. The sooner you file your back taxes, the better, as doing so can allow you to limit interest charges and other penalties that might increase your tax debt. If you owe back taxes to the IRS but were unaware of your reporting responsibility while living abroad, contact our tax CPAs for American expatriates. We can help you file the proper forms with the IRS so that your passport is not revoked.
Passport Has Been Revoked
If your passport has been revoked because you have seriously delinquent tax debt as an expatriate, you may be able to get a limited-validity passport. This will only allow you to return directly to the United States. To get this passport, you will likely have to take care of all arrears, or money owed to the IRS. If you cannot pay the entire amount you owe to the IRS, you might be able to get a short-term payment extension. This extension is typically 120 days or less. Even those with seriously delinquent tax debts might be eligible for an installment agreement with the IRS that allows them to make payments towards their tax debt over time instead of one lump sum payment.
Ensuring You Will be Able to Return to the US if You Live Abroad and Owe Taxes
To ensure that you will not face issues should you wish to return to the U.S. when you owe taxes to the IRS, it is important to confirm your tax liability before moving abroad.
If you plan to move overseas, consult with our tax accountants so that you fully understand your filing requirements as an expatriate. Despite living in another country, you will still have to report your income to the IRS on an annual basis. Even though income exclusions might leave you with no tax liability, you will still have a reporting liability. Failure to file an annual tax return, regardless of tax liability, can lead to penalties for expats. Expats might see their U.S. passports revoked if those penalties are not paid.
You can avoid this issue altogether by having our tax accountants plan and prepare your annual U.S. tax returns. We can use the applicable exclusions and credits available to expatriates and submit your tax returns by the necessary deadlines. In addition to reporting your income, you might have to file international information returns, such as Form 8938 and a Report of Foreign Bank and Financial Accounts. Failure to file these returns can also result in penalties that, if not paid, can lead to passport revocation for expats living overseas.
Call Our Tax Accountants if You Live Abroad
Call US Tax Help at (541) 362-9127 and speak with our tax CPAs for American expatriates today.
