# New US passport cross check to IRS?



## GeneM

After renewing my US passport in recent weeks and during the wait before receiving I did a few general searches on the process and discovered numerous comments that the IRS use this process as a means to check if overseas applications are tax compliant since you must submit your SSN with your application. Is this for real? If so how soon before they knock on your door?


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## Bevdeforges

Not really. They've been tossing this particular threat/rumor/story around for a long time now and there is little or no evidence that there is a systematic program of cross checking between passport renewals and tax forms filed.

To be honest, there are simply too many legitimate reasons you might NOT have to file a tax return any given year. Example: the year I moved from Germany to France to marry my now-husband, I simply had no income. No income, no filing requirement! I actually renewed my US passport the following year and had to give my SS number. Never heard anything further and I have traveled back to the US many times in the 20 years since then without any hassle. (I have filed my tax returns that were due since then - but I am approaching what may be another year where my income will fall under the filing threshold. Will have to see.)

Now, if there is something "fishy" about your returns, or they get a report from an overseas bank about your $50 million account balance and can't find a return from you in a long time, then they might just drop you a note to ask about it.
Cheers,
Bev


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## BBCWatcher

The U.S. Senate passed a bill that would have withheld U.S. passports (and passport renewals) from individuals with significant outstanding tax liabilities until they cleared those liabilities with the IRS. That bill went to conference with the House, and that particular provision was removed from the final bill that the President signed.

So no, there's no impediment to receiving a U.S. passport if you're tax delinquent.

However, I'm not aware of any applicable _restriction_ on data sharing between the U.S. State Department (issuing passports) and the IRS (part of the Treasury Department), except the other way -- the IRS is limited in how much data it can share with the State Department and with other agencies. If the IRS cares to look at the list of U.S. passport holders I think they can under existing law.

Do you have a U.S. tax delinquency? If not, no problem. If you do, the IRS might know you're a U.S. citizen renewing a passport. The IRS doesn't receive data on your income because that's not part of the passport application. But (perhaps) they know you exist. Is that a problem?


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## GeneM

Thanks for the reply. Unfortunately I do not have $50m stashed away. I'm also not aware of being delinquent in any manner which I'm trying to verify now.


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## Nononymous

It appears that the risks of being outed to the IRS by a passport application are currently very small.

I am a willfully (even cheerfully) non-compliant dual US-Canadian in Canada and decided to renew mine as the lesser evil because I was beginning to have issues crossing the border with a US birthplace on Canadian passport. 

Thus far no contact from the IRS, though that might have something to do with having renewed from a temporary European address.


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## Bevdeforges

Nononymous, I really don't think you should hold your breath waiting to hear from the IRS. Yeah, they make you give your SSN when you renew your passport, but quite frankly, that's more to make you think about it.

I've been told for YEARS that they do that "to see if you've been filing" but have yet to hear of anyone getting any sort of correspondence or hassling for not filing. Where you might get some push back is if they've already sent you some notice of a "problem" with your tax return which you have failed to respond to. They really don't have time to spend on us "small fry."
Cheers,
Bev


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## Nononymous

Oh I'm not holding my breath. I expect never to hear from them.

I was abroad for half the year anyway, figured if there was some incremental advantage to renewing from what was basically a temporary PO box, why not do it then?


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## FFMralph

Renewing the passport is every 10 years FACTA reporting starts in July 2014 and will occur every year. Your chances of getting caught just got worse!


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## Nononymous

Marginally higher. FATCA reporting in Canada looks pleasantly toothless - excludes tax-exempt accounts, not at all clear when or if banks will retroactively check citizenship for existing accounts below a high threshold. As I understand it, no data concerning my accounts would be collected.


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## Bamboozle

Nononymous said:


> Marginally higher. FATCA reporting in Canada looks pleasantly toothless - excludes tax-exempt accounts, not at all clear when or if banks will retroactively check citizenship for existing accounts below a high threshold. As I understand it, no data concerning my accounts would be collected.


I've just noticed this thread from 2014 after opening a new one on the site. Ah, well. 

The information on FATCA that you give here is mildly encouraging. I also can't imagine how they could identify my bank account as belonging to a US citizen, since I'm fairly sure the bank never made a note of this when I opened the account decades ago and the amount of money on the account has always been fairly modest. 

In this and virtually all other respects, I'm basically a non-entity for them because I've never filed a tax return. It is also encouraging to hear hear that they are leaving "small fry" like us alone -- although I've heard some horror stories from colleagues of mine and it's not pleasant to live in fear of the latest draconian measures by the tax man.

In other words, the SSN requirement for a new passport is just a nudge to get non-compliers on board, but remains fairly toothless? Nononymous (and the others!), is that still an accurate assessment of the situation, in your opinion?

Thanks!


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## Moulard

The only reason that they leave small fry alone is that the cost of discovery has been greater than the amount recovered. But bear in mind that Big Data starts to bring down those costs significantly.

It’s not the forensic audit you need to worry about. It’s the simple “please explain” letter. 

That alone is enough to get you on the radar.

Consider for a moment that in Australia recently the Dept of Human Services sent out simple please explain letters to anyone in Australia who had received Unemployment or Disability payments in the previous 10 years where pattern matching against Tax Office records suggested that they may have received payments that they were not eligible for. I don’t recall, but over the course of a few weeks they sent out something like 150,000 letters.

Now the actual implementation of it was completely botched, but setting that aside, it’s a future I fear that we face with US Tax compliance.

INS and IRS do share data today. No idea if the INS sends the SSN of passport applications & renewals… but it would be easy to do if they aren’t already. Remember while the IRS may not have any record of you, you provided your name, SSN and address to get that passport.

It would also be really easy for the IRS to take that data and use it to send a simple please explain letter to any and every one of those people to the address provided on the passport application where they had no record of a return.

And now you are on their radar… 

All for the cost of a bit of CPU time, a postage stamp and a sheet of paper.

That doesn’t mean it is cost effective for them to enforce it, but you need to bear in mind, once it gets to enforcement it is generally not about the “return on investment” it is about the deterring behaviour in others.


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## Bevdeforges

The consulates have been asking for your SSN for a couple of decades now when you apply for a passport. For those who don't have an SSN, they say to enter all 0s in the blanks. Frankly, there are simply too many perfectly valid reasons for not filing a return in any given year (mainly, "no income" or "insufficient income"). 

Frankly, given the current state of the IRS budgets and the fact that they have closed all their overseas offices (all 12 or 15 staff members, as I heard it), it's highly unlikely they are going to bother taking this "data mining" approach to tax enforcement. Especially given how common it is for middle income overseas taxpayers to owe $0 taxes, due to the FEIE and FTC.

If you're really looking for something to worry about, then fine. But I'd say the likelihood of any sort of mass action like this directed at overseas taxpayers looking to renew their passports is pretty remote. They already have plenty to do with pulling the passports of those who have recognized debts of $50,000 or more to the IRS. But for that, you need to have received a couple level of notices from the IRS, including probably some form of audit.
Cheers,
Bev


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## iota2014

Moulard said:


> The only reason that they leave small fry alone is that the cost of discovery has been greater than the amount recovered. But bear in mind that Big Data starts to bring down those costs significantly.


The cost/benefit calculation is presumably not the only, or even the most important consideration when it comes to USCs living outside the US borders. Extraterritorial tax collection usually depends on getting the person back to the US tax courts.

That's why the passport revocation legislation allows for issuing a restricted passport: one that can only be used for return to the US.

In any case, a person who wants or is obliged to use a US passport really should be considering how best to comply rather than how to stay under the radar. You're not under anybody's radar if you're trying to renew a US passport.


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## Bevdeforges

iota2014 said:


> That's why the passport revocation legislation allows for issuing a restricted passport: one that can only be used for return to the US.


Oddly enough, for any dual national, that is just about the only use for a US passport anyhow - to return to the US (since you're not supposed to enter the US on any other passport if you are a US citizen). There is no obligation to renew your US passport if you have another one you can use for your travels.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> Oddly enough, for any dual national, that is just about the only use for a US passport anyhow - to return to the US (since you're not supposed to enter the US on any other passport if you are a US citizen). There is no obligation to renew your US passport if you have another one you can use for your travels.
> Cheers,
> Bev


Yes - the difficulty arises for those who don't have (and possibly can't get) that second citizenship. A problem that may rapidly become more common in these days of worldwide national anxiety.


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## Moulard

For those of us with a second passport and few if any US assets it is easy. There is no recourse but the courts... and that gets complicated fast and is probably a significant deterrent.

I am a dual citizen, I have no longer have any meaningful US Assets, if the IRS was to determine that I was "wrong" the only options would be to try to recover any amount due through the court systems of two countries. I, and those like me, are likely safe.

I do know, that in the case of Australia, the extradition treaty has been invoked over cased of US Tax fraud. Yes, that was a case that involved millions. It will not happen for those cases involving thousands. 

For those on only a US passport, living outside of the US with Permanent, or not so Permanent Residency.. even if that is very long term (consider the Swiss multi-generational citizenship requirements) things can get problematic. 

As the US tries to resolve its significant budget problems, I fear that those of us who have been forgotten under the banner of "no taxation without (meaningful) representation will end up being the scapegoat and easy prey. Lets face it ... ask yourself, would the representative in your last place of residence in the US actually take up your cause. 

I know in my case the answer is NO.

If the eye of Sauron lands on you.. at least have an internally consistent position. The issue is that as governments start to cooperate as per FACTA and the IGA it gets harder to say one thing to one tax authority and something completely different to another.

The ATO and DHS dragnet shows how easy it has become.


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## iota2014

> I do know, that in the case of Australia, the extradition treaty has been invoked over cased of US Tax fraud. Yes, that was a case that involved millions. It will not happen for those cases involving thousands.


Presumably the person was either already convicted of a felony, or committed perjury by lying on an IRS form?



> The issue is that as governments start to cooperate as per FACTA and the IGA it gets harder to say one thing to one tax authority and something completely different to another.


For me, when I was dual, the issue was that as far as I was concerned I had both a legal and a moral responsibility to pay UK taxes, whereas I had no moral or (enforceable) legal responsibility to pay US taxes. If I had needed or wanted a US passport, I think I would have felt I should try to comply with the tax code, to the extent necessary.


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## Moulard

iota2014 said:


> For me, when I was dual, the issue was that as far as I was concerned I had both a legal and a moral responsibility to pay UK taxes, whereas I had no moral or (enforceable) legal responsibility to pay US taxes. If I had needed or wanted a US passport, I think I would have felt I should try to comply with the tax code, to the extent necessary.


Yup. 

For some people there is a third reason: emotional tied up with the concept of citizenship and identity that is quite different, and sometimes that will over-ride both need or want for a passport itself. I know of people who found it difficult to renounce, even though they have no recollection of the US at all, and another who actually went back to the US as part of a foreign exchange program in school.

I happily pay my taxes in Australia. They even give me a receipt thanking me. I pay significantly higher rates than what I would pay in State and Federal taxes, were I employed at the same rate in the US.

I do try to comply with US tax code. Not always very well, but I try. 

For me at least, while it is a purely reporting obligation I will pinch my nose. 

The day that it effects my ability to live my life in Australia is the day before I start the renunciation process. If I can't open a bank account, can't travel to somewhere I need to go, have to actually pay hard earned coin, or can see that I am getting too close for comfort to crossing the line to being a covered expatriate ... that's the day. 

I see that day coming. Its just not today.


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## Nononymous

Bamboozle said:


> In other words, the SSN requirement for a new passport is just a nudge to get non-compliers on board, but remains fairly toothless? Nononymous (and the others!), is that still an accurate assessment of the situation, in your opinion?


That is still my opinion.

Everyone's situation is different, of course, but if you're in a good situation (second passport, banks haven't asked about US citizenship, no US assets or income) then staying off the radar is still the best course of action.


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