H&R Block highlights new US passport risks for tax delinquents

H&R Block highlights new US passport risks for tax delinquents

H& R Block, the largest tax return preparer in the US, has launched a campaign to call attention to a new effort on the part of the IRS to restrict access to US passports to those with “seriously delinquent” tax debt.

The campaign comes as American taxpayers who live overseas face a 15 June deadline to file their tax returns. Homeland taxpayers were obliged to have theirs in by 18 April.

As part of the campaign, the company has posted a 109-second video on YouTube that features one of its experts, Eric Scali, discussing how those who owe US$50,000 or more to the US tax authorities can ensure that their passports aren’t taken away, or are otherwise restricted.

In a statement announcing the campaign, H&Block noted that the new programme to link passports to tax compliance “could impact hundreds of thousands of taxpayers across the globe”, since that’s roughly how many are understood to currently owe the IRS more than US$50,000.

(In total, more than 15.6 million taxpayers owe the IRS back taxes, according to H&R Block.)

“With four in 10 US citizens holding a passport, and 9 million US citizens living overseas, this [new regulation allowing the US government to deny passports to tax delinquents] could especially impact expats, who are more likely to owe larger sums of back taxes,” H&R Block added.

The way it works, according to the tax preparation agency, is that the IRS determines which taxpayers it considers to owe “seriously delinquent tax debt”, and then provides a list of such individuals to the US State Department. The State Department then is able to deny passports to any new or renewing passport applicants whose names are on this list.

“The State Department can also revoke or limit existing passports,” H&R Block points out.

It says the reason expats are more likely to owe back taxes than homelanders is because they tend to be “less influenced by traditional IRS enforcement mechanisms”, given that they’re further away.

The available data on expat non-compliance is old, and pre-dates recent legislation meant to force US taxpayers with overseas accounts to pay what they owe. But to the extent it’s still valid, it suggests US taxpayers living abroad have not exactly been coming forward to the IRS with their chequebooks: According to figures cited by H&R Block, foreign-based US taxpayers received more than 855,000 notices from the IRS in 2014, while in 2008, the General Accounting Office reported that “at least 224,000 US passport holders owed back taxes”, of which “many” were said to owe “significant amounts”.

H&R Block said there are ways delinquent taxpayers who owe large sums may set up installment arrangements with the IRS, although it noted that such arrangements can “take weeks, if not months” to put together.

“Once a taxpayer is in good standing, the IRS will send a notification to the State Department within 30 days to remove the seriously delinquent tax debt status, and lift passport restrictions,” it adds.

However, for now at least, “there’s no expedited process in place to lift passport restrictions for taxpayers who get back in good standing”.

As reported last year, H&R Block recently launched a service that helps expatriate Americans with their taxes, out of its Kansas City base.

To view the H&R Block YouTube video, “How to Keep your Passport in Good Standing if You Owe Seriously Delinquent Taxes”, click here.