I've had 2 instances where the IRS erroneously concluded that I owe them large tax bills. It took a few months of back and forth paperwork and phone calls to resolve, and have the IRS note on paper that I owe them nothing.
With this law, an erroneous IRS decision can limit passport issuance and international travel. Three letter agencies are probably salivating at the prospect of 'errors' in possible suspects. This just unjustly empowers the government.
I've had a couple run ins with the IRS as well where they thought I retired (nope) or did something I didn't do.
It was pretty easy to resolve by paper for me, couple letters back and forth, but yeah it takes a while. Fortunately the IRS was good about it all.
I wonder though if they're still investigating (sending me letters and I am responding) if it counts as owing them as far as this law goes?
From what I remember from he letters provided by the IRS, if I'm responding with legit responses (I sent them the not correct paperwork a few times and they were still ok with that) they consider the matter in one phase, but if I'm not it goes to another phase. It would make sense (hopefully the law does) that provided I'm responding and the IRS is cool with my responses that I'm not subject to the law.... but if I'm not responding then maybe the law takes effect?
I've had some close encounters with both the BOE (California's tax agency) and the IRS.
Both operated pretty similarly, basically assuming we owed taxes unless we could prove otherwise (which is technically illegal since they have the burden of proof initially). They accused us with no proof, to intimidate us into handing over documents which they then used to build their case against us.
Lawyers and accountants only offered to "negotiate" installments as the only help they could provide (and charging $$$$).
In the end we won both times by researching the law, past cases, internal procedures, filing FOIA requests, gathering evidence and responding accordingly. In one instance they were being super unreasonable and unresponsive until we filed a request to go to court, at which point they became much more amicable and willing to "solve" our case.
INAL, but if I had to deal with this stuff from the beginning again, knowing what I know now, I would not hand over any documents until it gets to the point where they either drop the case or make a tax assessment that allows me to request to go to court. At that point they don't have anything, I have all the documents and I know I've done nothing wrong.
It's a stressful strategy to execute (nobody wants to have a tax agency going after them), but probably the cleanest.
Passport denials don't occur immediately. The law provides for a grace period exactly because of situations like yours.
I had the same thing happen once due to a clerical error by my employer's new payroll service. The IRS was actually quite helpful, and immediately put a hold on any penalties or extra taxes when I called and explained what happened.
It seems like you would have to go far beyond that stage without settling the tax bill before you would be at risk of having a passport application denied.
> To be at risk of passport denial, a taxpayer must typically be subject to a lien, which advises creditors of a debt to the IRS, or a levy, which gives the IRS the authority to seize assets.
> Taxpayers typically aren’t subject to passport restrictions if they’re contesting an assessment administratively or in court, or if they have pending or current installment-payment agreements or offers-in-compromise with the IRS.
Have a feeling this will end up extorting American expats and people who grew up abroad without ever living or working in the US (who are only US citizens because of their parents).
When FATCA was passed, it flipped a switch that automatically made tens of thousands of people around the world who have never set foot in the US into criminals by default since they'd never filed US taxes (the US has the only global taxation system in the world).
It sounds like those people who haven't spent the ridiculous sums of money on accounts/lawyers/etc needed to become compliant during the grace period will likely now have the threat of their passport being revoked held over their head.
I'm sure we'll see the already record-high numbers of people renouncing their US citizenship accelerate. BTW, the US also has the highest fee to renounce citizenship in the entire world, it costs $2,350 to not be a US citizen.
The absurdity of it all would be funny if it weren't so cruel.
> I'm sure we'll see the already record-high numbers of people renouncing their US citizenship accelerate.
That sounds like a big deal, until you see how trivial the number is: 6,000 to 7,000 people per year, or 0.003% of US adults.
The US hands out about one million green cards per year. There are typically five million or more green card applications pending in a given year.
150x more immigrants become citizens every year, versus the number of people that renounce their US citizenship. The US could triple that number any time it wanted to.
During the past few years under 10,000 US citizens have renounced their citizenship per year. So basically negligible as a percentage of the population.
You should compare that number to how many renounced before FACTA passed and you will see it is not trivial. It is the main reason people renounce now.
While the numbers provided are not in the millions, it's important to understand that the oft-cited numbers are also (thought) to be incomplete. Here is one example.[1] But I see the claim fairly regularly.
Also, the discussions often focus on people who renounce their U.S. citizenship, but I rarely, if ever, see any on people who relinquish. And while the result with respect to U.S. citizenship may end up being the same for both processes, I understand that the treatment of the former citizen is often different based on the option selected.
Lastly, while the numbers may be small, we don't know the value of the wealth that they are taking with them. Could be little or a lot. And while yes, there are exit taxes, people with enough to lose will expend some energy to not do so.
The point is not that the absolute number is high or that it has any net effect on the number of American citizens.
The point is that the number sky rocketed from basically nobody to thousands of people because FATCA is such a draconian, terrible law.
In absolute terms, only about 3.5% of Americans even travel abroad each year let alone live abroad. We could put a wall around the entire country and refuse to let anybody leave and a majority of Americans would not care. A majority of American citizens don't even have passports in the first place.
The small minority of people who live and travel abroad perform a very important function for US industry and international relations. Making life more difficult for them for no good reason is bad for our economy.
EU passports aren't just handed out to Western hemisphere folk, either, without certain specific ties (e.g. Ireland will give citizenship if one has an Irish citizen parent).
Technically the US doesn't prevent you from leaving the country for not having an American passport - it's other countries that are likely not to let you in.
But that's between you and this private company :)
Plus, I think at least part of the reason why airlines would be reluctant to board you is exactly that - knowing that the destination country wouldn't be happy with them dropping you at their doorstep with no passport in hand. What would they care otherwise?
This is exactly it - the airline is responsible for returning you home if you are denied entry to a country.
My wife used to work as an air stewardess, and one of her longer flights was a 16 hour non-stop flight from Dubai to Brazil. This involved a 3 day layover, and on the inbound flight she saw some (rather tired) passengers who had been on the outbound flight.
Apparently they were denied entry, however it was too late for them to go back on the same aircraft, so they had to wait in the airport (airside) for the next flight.
Right, so that goes back to my original point - it's other countries not letting a passport-less person in. The airlines have no other choice but to accept the fact.
An airline denied my passport (had gone through the wash) I had just returned from Canada and had used the passport, in the same condition, in the country I was going to. But the airline didn't care. They said they could be fined $25000 for bringing a passenger without a valid passport plus they would have to return me.
That private company is constrained by rules established in the countries it operates in. It's weirder than you might imagine. I regularly fly between the EU and USA and the immigration and security rules are different for American operators than for their EU counterparts.
So "John" owes over $51K to the IRS but simply doesn't have the money or assets to pay. $51k may seem like a lot but it isn't when considering many years, penalties, fees and interest. So, is he condemned for life to never travel outside USA to visit ailing mother and so on? Or just apply for humanitarian exception passport and hope?
No, not condemnded to life. IRS back taxes have a ten year statute of limitations (from the point of assessment). Formally they call it the collection statute expiration date (CSED). They can't collect after that. If you owe the IRS Wesley Snipes / Willie Nelson type money, they will typically sue you in court however (which can effectively extend the ten years by generating a suspension of the countdown).
Googling[1] suggests that the IRS has 3 years to audit you and ask for more money in general, and 6 years if the amount of income omitted is >25% the income you reported.
This seems eminently reasonable to me. Just don't lie to them and you don't have to live in fear of making a small mistake.
The IRS will settle tax debts for less than the amount owed if you can prove you have few assets and a low income. They're just like any other rational debtor in that regard.
The IRS doesn't even care about old tax debts in my experience. People perennially bring up the nightmare scenario (as suggested by the GP) where owing $1.99 turns in to a zillion dollars over the years. I was going through a background check a few years ago that required subjects to have paid all their debts to the government, and I found a temp job from a past tax year never sent me a W-2, so I filed an amended return to pay the $10 or whatever it was I owed. The IRS sent me back a check plus interest and a polite letter saying it was past the statute of limitations so they could not accept it.
This sort of thing tends to confirm my prejudices about those who complain all the time about the IRS as a bogeyman.
To the extent this comment can be construed as anything but content-less partisan dog-whistling, it's pretty off the mark here. Obnoxious as this particular measure is, it was passed as part of the funding for a, relatively speaking, bipartisan infrastructure bill focusing on highways and rail. It's hard to imagine what "real Americans", whoever that's meant to imply, would rather it be spent on.
I'm guilty of being obnoxious? It sounds like you could push that slippery slope until "obnoxious" is simply "any opinion I don't agree with." My comment quite effectively brings up the issue of majority of Americans not wanting to pay taxes for most of the things that taxes are actually going to - we are not being represented effectively. You're the one making this a partisan issue. Just look at some of the polls - or just how many Americans are using other country's infrastructures to avoid excessive US taxes. On topic with this article is the fact that US is collecting taxes worldwide on earnings not even being made in the US - by people who are merely US citizens and not residents! If my comment were so contentless, then you wouldn't have the authoritarian reply that I'm merely whistling for my underclass of "dogs."
I'm not sure I see how. Seems like a great incentive, actually. Your passport is about to expire, but you're not going to get a new one unless you settle your debts.
I doubt people with more than $50k in tax debt are the kind of people who can't come up with the money, they're just the people who don't want to.
If you live and work overseas, the IRS commonly miscalculates money owed. This can leave one stranded through no fault of their own and/or seriously interrupt a career. This law doesn't only sweep up tax evaders...
It's not like they immediately revoke your passport as soon as the IRS decides that you owe them money. You need to get a lien or levy against you. People who are contesting the debt either administratively or in court or who have a payment agreement with the IRS can still get a passport.
The State Department can also bypass the rule for emergencies or humanitarian reasons and will do so to allow someone to return to the US, so it is not possible to be stranded outside of the country because of this.
Re: Part I - Yes. Getting a payment agreement works. This is nicer when you aren't caught by surprise.
Re: Part II - "Home" for many is not the US. That's just citizenship. Trying to island hop across the South China seas without an "active" passport is problematic. Or if one were to return to the US to bury a parent, getting back to work can be problematic.
I'm not arguing that it can't be worked through. But it is a real time-consuming hassle, esp. when caught unawares because of bureaucratic snafu, that can be career limiting when caught on the wrong side of a dotted line...
About $120K~$150K depending on the host country and their particular income tax scheme. Which is not a crap salary, but it's certainly not over the moon Fortune 500 executive comp either. ($50K is about 1/3 of $150K, which is about what a W2 employee would pay - 1099 folks would pay a bit more)
There's supposed to be a deduction applied to income taxes paid to your host country - up to a cap. There are two intersecting curves related to host-country taxes paid and US income taxes owed minus the exempted part, which I'm not going to describe here, but through key-entry error or whatever bureaucratic things that happen in paper-processing-office, it is not uncommon to get a bill on a year for about that amount. IF their response to your filing in a year (say 2012) gets lost in the mail and IF the same thing happens the following year - you can owe $100K (on paper - even though mistaken), and not even know it.
I once received a mistaken IRS tax bill of $600,000, more than I had earned in my entire life up to that point. After much paperwork filing, they decided I actually owed them nothing but I still had to go through the process contesting it and providing stacks of documentation. Ironically, they already had the exact same information I had, they simply didn't bother to look at it. So I can easily imagine that it wouldn't be difficult for the IRS to make a mistake and come up with figures much higher than $51k.
To their credit, the IRS was fairly reasonable to work with while this was going on. I think the examiner caught on pretty quickly that something didn't make sense.
Of the two or three dozen Americans I have met working overseas for an extended period over the last 25-or-so years, I don't think I know of one that hasn't had it happen at least once... Most end up hiring KPMG (or some such firm -- which is not cheap) to end up doing the filings and follow-up, just so it never (ever) falls through the cracks again...
EDIT: There are about 5M Americans working overseas. At an error rate (of this type) of about 5% (anecdotally, I'd put it certainly above 3% and usually (most years) below 10%), that's still hundreds of thousands of Americans each year who get to have their life thrown into a tailspin. It's not so simple as having the DMV mis-spell your middle-name or shipping your driver's license to the wrong address.
Is this just denied a new passport? Or the ability to leave. If it is just a new passport that would drop the numbers considerably..... also it depends on what the owing the IRS actually means.
I noted in another comment that I've had my run ins with the IRS before. Provided you respond to them in a timely fashion (they give a lot of time) they consider it is in one phase.
If you don't respond, then it is another phase.
I'm wondering if we're talking about situations where the situation is in a particular phase. Not just the IRS asking, but if you already chose not to respond....
I don't know much about these phases, because I have tried to respond as soon as requested (although there have been some scares because of lost letters).
I do know of a several people (4 to be precise, in the last several months) that have (had) non-expired passports denied permission to leave the country (the US) to return home to work, and one person who was no able to renew an expired passport at the embassy of their host country of 20 years (Japan)[fn]. This is all anecdote, and maybe they were in Phase 1+N of your scheme...
[fn] One could argue the wisdom of spending one's entire life/career working in Japan, knowing that they will boot you out as soon as you hit 65 y.o., but that's a different conversation!
I agree it sounds weird. And if you stay in one country - having a local boutique with US tax experience makes more sense. If you bounce around, it's nice to have someone with presence in all the places you might end up traversing. Also, depending on who you work for, sometimes employees can get a deal dealing with their corporate's accountants.
And so the totalitarian demagogue builds their “Berlin wall” to keep citizens in... anyone crossing will be shot. Any unapproved thoughts or speech will lower one’s social credit, eventually making them ineligible for travel, banking, voting, government services, etc... too low and they will be sent to reeducation camps. Parents and children split apart and sent to concentration camps. Blaming certain groups for a country’s problems. Where have I heard this before? hmm.
Another (non-paywalled) article [0] on this says they're only denying/not renewing passports for people with at least $51,000 in tax debt. As such, this isn't exactly "picking on the little guy", and should probably be considered in that light. If you have an outstanding tax bill on the order of 1.5x (or more) than the median per capita income — if you owe more in taxes than most people make — that's kinda on you, and I'm really not moved to feel too badly about the government taking additional steps to recover that.
America is one of I believe only 2 countries that demand tax on income from its citizens who live and earn abroad (and who have almost certainly already paid tax on that income to the country in which they are living).
My understanding is that they won't always even accept a renunciation of citizenship if they believe you're doing it to avoid paying them taxes.
It's no surprise to me that there are significant numbers of expats with large unpaid tax bills, possibly from years of working, paying taxes in the country in which they live but never paying US taxes.
Point being that this is probably not primarily targetting rich people who aren't paying their share, but people who are paying their share in the country in which they live and work, but are failing to pay an extra portion of tax to a country they left years ago.
You're aware that foreign tax can be taken as a credit or deduction, yes? Further not only are you incorrect about the whole "won't accept" thing, they have a whole process for exactly how you do it. Importantly, that process only applies to well-off expats (multiple years at $150k+ or >$2m in net worth) and anyone else who wants out can get out quickly and cheaply. This whole flap isn't about"can't pay", it's about "don't want to".
A lot of the problem isn't that they owe taxes but that they have trouble filing correctly. You're required to file even if you owe no tax. The US has fairly high reporting requirements.
Think of all the tax forms you've received in the US. W2. All the various 1099s. All the docs related to stocks, SPP, interest on mortgage, real estate transactions, etc. The IRS still needs all that paperwork even if you have these deductions. As you live abroad and conduct these transactions abroad, it becomes entirely your responsibility to fill out these forms properly as they're only going to give you forms relevant to their country's taxes.
This proves burdensome enough that a lot of expats pay thousands a year to tax firms to get all this info and file on their behalf. It's too time consuming and risky to do it yourself. For those lower income folks it's cheaper to renounce than to keep paying these fees.
10% would be excessive if it were typical for the general public, I would agree. But not so much for a tiny subset with high earnings and particularly complex affairs. It doesn't make one the moral equivalent of children locked in cages.
>But not so much for a tiny subset with high earnings and particularly complex affairs.
I think this is where I think we're talking about different things.
It does not only affect people with high earnings. It affects all US citizens working abroad - including those who didn't exactly choose to live abroad.
Again, I'm not talking only about double taxation. I'm talking about the need to file (which is true even if you earn $20K/year in a Latin American or Asian country). In my other comment to you I gave examples of fairly ordinary people in other countries who will be considered as US citizens under current tax laws who are legally bound by the US to do all that paperwork every year. As someone else pointed out, if your income is over $11K/year, you have to file. Run a small store that barely pays the bills? You have to file. Do some stock transactions and gain/lose money? You have to file.
Just think of everything you have to include in your tax form (if you are in the US). Then think of all the tax docs you receive annually. You need to create all those tax docs yourself - including the ones you don't include with your return (in the US, the agency that issued the document already reported that info to the IRS). I got all these docs from various agencies even as a low earner in the US - this is definitely not about high earners.
"think of all the tax docs you receive annually. You need to create all those tax docs yourself - including the ones you don't include with your return"
I find this inconceivable - it sounds absurd, because (a) not all income is reported on those forms anyway, even US based, and (b) fabricating them yourself eliminates their purpose as a means to prevent tax evasion.
What's the IRS going to do, say "well, you tried to file a tax return with 10K euros of income, but we didn't get a W-2, so you're in deep trouble now"? Are they going to add to that 10K or subtract from it?
If you are a US adult who has filed tax returns for a few years, I would expect you to have some experience paying taxes on income that wasn't independently reported. Surely you don't fabricate the documents that are normally sent by the income source, when they aren't present. I just don't believe that is a thing that is done.
Most of what I said is a simple Google search away. This will be my last comment:
>I find this inconceivable - it sounds absurd,
This is a fairly poor metric for evaluating the veracity of anything.
>because (a) not all income is reported on those forms anyway, even US based
In my experience, most forms of income in the US have been categorized. If you made money, there very likely is some appropriate form you should fill out. How much information the IRS needs about it varies amongst income types. As an example, I sold stuff online for a short while - did not make much money, but the volume was large (probably in the hundreds of items in one year). When I looked into what I needed to report for tax purposes, I was hoping it would be a simple case of 1. Costs of goods 2. Revenue made, and tax on the net. Nope: I found it fairly burdensome. Had I paid a tax person to do it, I would have spent more on the tax professional than my net profit (which really was very low).
>If you are a US adult who has filed tax returns for a few years, I would expect you to have some experience paying taxes on income that wasn't independently reported. Surely you don't fabricate the documents that are normally sent by the income source, when they aren't present.
No one said anything about "fabricating". If the agency doesn't provide you one, you provide that information to the IRS in some way or other. Sometimes it will literally be filling out the same form. In other cases, the IRS will have a schedule for you to fill out. Perhaps the W-2 was a bad example.
I know someone who sold a property he owned outside of the US. The income generated from the sale had to be reported and capital gains tax had to be paid. Now in the US when you do this, some party (I believe the seller's agent) gives you a simple form which you should attach to your tax return. Since this was a foreign transaction, the other party gave no such form. He considered just reporting it as an investment without that 1099. He consulted some tax folks, and they told him that he should do that, but while the IRS may look the other way, legally he is obligated to fill out the form and attach it. The problem was he did not have access to all the figures needed to fill out the form. They advised him to fill out what he could and likely the IRS will accept his explanation.
I personally have had to deal with the IRS - as others have commented, while it always does seem to work out, they can be very annoying. In my case, I was claiming education credits. Some years after I left school, they wanted proof. It took several back and forths to get them off my back, and the experience was quite negative. They continually said "Yes, if you give us such and such information, it will suffice," and when I gave them said information, they kept saying "Not enough - we want more proof". Had to reach out to the university for help, and they were quite surprised - they said they never had to give out as much information as I was asking for students to get those credits, and I was lucky they still had the extra information that I was requesting.
So yes, perhaps usually the IRS will accept the explanation for missing information in forms you can't get because you don't live in the US. But it's not a guarantee.
>It's a matter of opinion, but I don't think it's an intolerable burden if your tax prep costs are <10% of your total tax bill.
And I do. For most of the world, tax prep costs are negligible. I'm not sure how many countries have tax prep for individuals as a big business like it is in the US.
In context, we're not talking about a big business, because the market is a small number of people with special needs. It seems quite inappropriate to compare them to "most of the world".
>In context, we're not talking about a big business, because the market is a small number of people with special needs. It seems quite inappropriate to compare them to "most of the world".
I think we're talking about very different things. To directly address your comment: When you say the market is a small number, you are correct: The market is workers living outside the US who happen to be American. Foreign workers of pretty much every other country do not deal with this. It's a market very targeted to Americans.
And its smallness makes it expensive.
But when I said how your comment about paying for tax prep was a very American outlook, I was referring to the reality that so many in the US rely either on tax software or pay a company to do their taxes. This is a practice alien (AFAIK) to most countries - they have much simpler tax codes and rarely do they need to make special payments for tax prep. Having to pay a tax prep company because you happen to be American is effectively a tax on being an American. For many outside the US, saying "It's not a big deal - just pay a tax company to handle it" is like me telling a typical American "It's not a big deal. Just pay a company $500 annually to do the paperwork that gives you the right to own a pet" - it's a crazy notion. It's easy to dismiss it as "Less than 10% of your tax burden - what's the big deal?"
Just a few days ago I was reading a story of a Canadian/American dual citizen. She was born to American parents, but as a kid her parents migrated to Canada - she had lived most of her life in Canada, and had no real relations in the US. The old tax law was that she is not considered a US citizen unless she actively declares herself as one after she turns 18. That law changed recently (I think under Obama) to treat her like all other Americans for tax purposes. Suddenly she had to deal with filing paperwork, and getting taxed on certain retirement/investment benefits (that are tax free in Canada but not in the US - think stuff like Roth IRA in the US), etc.
When I was in school, I knew many foreign grad students - it can take 5-8 years to get a PhD - and if you're young and married, there's a good chance you'll have a kid or two during your stay at school. Some of them returned to their home countries (contractual obligations, etc). I don't know if their kids will eventually move to the US and claim citizenship, but they will have the burden of dealing with US taxes wherever they live in the world - whether they earn a good amount of money or not.
"It's easy to dismiss it as "Less than 10% of your tax burden - what's the big deal?""
My heuristic is that a percentage of a percentage is quite small, in general. It's fundamentally different from $500, which could be a lot of money or not depending on context. Percentages scale.
I'm aware that it's not what you said, this song ain't about you homie.
(The rhetorical) you has a choice; fill out the paperwork you knew you were going to have to fill out (!), or renounce citizenship. If you make enough that this is a hardship, you can afford to pay someone to fix it for you. If not, renouncing (what I was talking about) is easy and cheap.
>If you make enough that this is a hardship, you can afford to pay someone to fix it for you. If not, renouncing (what I was talking about) is easy and cheap.
Your statement has within it an assumption that it is not a hardship for low income earners.
I would like to congratulate you. For a while now I've wondered at the value of engaging in online debate, and you've finally convinced me to apply this rule:
"Don't engage much with someone who can be enlightened with 30-60 minutes of searching the Internet, unless there is an audience."
Summary: Life is too short.
You have come off as quite sure of your stance, and I do not get any signal from you that you'd like to be informed otherwise. The submission is old enough that I do not think there is any audience left. I do not see any merit in engaging further.
You might get more out of the conversation if you read more critically. You have repeatedly on this thread totally missed the point of the person you are replying to.
That lack of understanding dovetails nicely with your apparent goal of educating others about their mistakes.
Renouncing citizenship is not something anyone should do who does not already have citizenship of another country. It's not always trivial to acquire said citizenship.
You seriously underestimate the burden the US places on its expats and banks that do business with them. Its to the point most foreign banks will not do business with US nationals.
Its actually the vast majority of foreign banks, except those with a strong US presence (and even then not always. E.g. Deutsche bank won't take US clients in Germany [0]).
> Most Foreign Banks Don't Want U.S. Clients; How To Find One That Does [1]
> U.S. ambassador to Switzerland is asking banks in the country to reverse course and accept Americans as clients.
[2]
"America is one of I believe only 2 countries that demand tax on income from its citizens who live and earn abroad"
When I pay taxes to a foreign country, I generally get a tax credit on my US taxes. Complaints like yours tend to lead me to infer you think you're entitled to lower than US tax rates in some tax shelter locale, but you are implying (for sympathy) the issue is being taxed higher than a typical citizen of the EU or US.
And? If you're that invested in another country, give up your US passport and get one with the new country. Alternatively, work to get the tax laws in the US changed. It's not like this stuff is a secret - if you want to work abroad you're going to get double taxed. Not paying the US portion of taxes is illegal. I don't understand the issue here, maybe you can explain it to me?
It is not that simple to renounce US citizenship. As op wrote, if they think that you are renouncing because of taxes, they will flat out deny your request. Furthermore, changing tax law for an expat is virtually impossible because it is very hard to vote from abroad, and expats are very diverse so no one politician would care to represent them.
What do you mean double taxed? If you get a tax credit for foreign taxes, it's rather disingenuous to claim to be double taxed, although you could argue it's true in the sense you file for multiple jurisdictions.
Please let's not forget that text debt in the US is calculated with penalties and interest retroactively, upon discovery. I absolutely know people that had unknown tax debts (from assets they unknowingly "owned" and got in divorces) pop up, and loom large because of accumulated penalties and interest. (Penalties cannot exceed 25% of the original tax debt, to my knowledge, but I don't believe that interest carries the same cap, and is calculated at the federal short term carry rate + 3%).
For everyone freaking out about this consider that half the country doesn’t owe the irs any money because they make too little. So poor people are by definition unaffected. In addition, not paying taxes is literally illegal so not sure why you should be able to blow money on vacations to europe when you are breaking the law and owe the people of the united states money.
>For everyone freaking out about this consider that half the country doesn’t owe the irs any money because they make too little.
45% of tax filers owe no income tax. That's not the same as owing nothing. Independent contractors don't have FICA deducted from their paychecks, and with the rise of gig jobs, there are quite a lot of "poor" people who owe 15% of their income at the end of the year.
The subtle shift is from purely civil penalties (ie garnishment, collections, seizing funds) to denying rights. There might not be a resurgence of debtors’ prison (except for unpaid alimony/child support) but other half-step curtainment of rights like voting are a real possibility.
With this law, an erroneous IRS decision can limit passport issuance and international travel. Three letter agencies are probably salivating at the prospect of 'errors' in possible suspects. This just unjustly empowers the government.