Besides FATCA, how would they know I am tax delinquent?

Oct 3, 2014

  • They could find you when you get or renew your US passport, which is required to enter the United States;

The way it is supposed to work is that you are mandated to provide your US Social Security Number (SSN) when you apply for a passport. The Department of State then forwards your address and other info to the IRS. It is important to note that tax information is extremely confidential in the US, as such; the flow of information can only go from the Department of State to the IRS, not the other way around. Therefore unless laws get changed, being tax delinquent would not cause a US passport to be denied, however that would cause the IRS to know where you are.

Someone who doesn’t have an SSN can legitimately write 000-00-0000 on the application. Other than that, failing to provide the SSN could result in a $500 fee from the IRS, but happily paying it would not solve much – the IRS would still know that you are a US citizen and your name/address.

On the plus side, as it is being tax delinquent would not prevent somebody from obtaining a US passport. Also, the IRS doesn’t seem to have actively pursued that enforcement method to date… But it might well change, see attached regs.

  • They could find you when you cross the border with that passport;

Short of criminal prosecution, or having levies against your assets, the info wouldn’t flow from the IRS to Homeland Security. The potential is there and oftentimes, Homeland Security or local enforcement authorities have wide powers to harass somebody with little due course, especially in the Constitution Free Zone. While my first instinct is to not be paranoid and dismiss this one, the potential is clearly there and has been used at times; I just like to think that it is for cases out of the ordinary (as opposed to a random non-filer), just try not to be the webmaster of Julian Assange’s official support website

  • They could find you when you invest in US securities (with a US or Canadian broker);

Without FATCA, I would dismiss this one. If you’re identified as a non-US person and you have the appropriate US tax (FDAP) withholding taken from your dividends, I don’t’ see the US going after you.

  • They will find you when your mother (who lives in the US) dies;

You inherit the money. The IRS will know where you are, they will not know if you made more than $10,000. Also, if your mother leaves an estate of less than $5,000,000 you wouldn’t have to pay estate tax, so not sure the IRS would pay much attention to it.

  • And if all else fails, they will find you when you die. Because even if you were willing to pretend you weren’t a US citizen, your executor, or her lawyer won’t want to play that game.

That’s my favorite one. Solution #1: Staying alive. Solution #2: Die with an estate of less than $5,000,000 – again, no tax due, probably not high on the IRS radar.

But quite frankly, when I die, I promise not to worry about these things much longer.

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