IRS Customs Hold

Nov 8, 2014

I’ve seen much talk in the community of American abroad about the ability of the IRS:

  • To prevent the issuance of a passport to delinquent taxpayers (currently not true, but when applying for a passport, the Department of State will inform the IRS of the address you provided). Interestingly enough, the Department of State can deny the issuance of a passport in the case of the delinquent child support payment.
  • To prevent somebody to enter the US – or to seize their assets. This one was harder to debunk since US laws give extremely wide powers to Homeland Security when someone applies for admission into the United States. The laws are also in place to allow the IRS to inform Homeland Security that someone is delinquent.

I’ve addressed these issues in my post Besides FATCA, how would they find me? I am posting today to discuss IRS Customs Holds, which is when the IRS informs Homeland Security that someone is delinquent when applying for admission into the US, the taxpayer will be asked where he could be reached during his stay so that a friendly visit from IRS personnel can be arranged. I made the case that these IRS Customs Holds are rare and that the average US citizens living abroad were unlikely to be affected by them.

Today, I saw sources of information which are more quantitative.

A report by the Treasury Inspector General for Tax Administration, a bureau that is responsible for overseeing the IRS was released back in September.

Namely, the Wall Street Journal at IRS Faulted on Tax Collection From Expats states that “According to the report, there are about 1,700 names on the current list, which includes both resident and non-resident U.S. taxpayers. International taxpayers owe about $1.1 billion of the total $1.7 billion in delinquent tax payments associated with people on the list, it added.”

So, if we do the math, $1.7 billion divided by 1,700 names comes out to an average liability of a million-dollar, which goes back to my point that these are not average taxpayers and that most Americans living abroad wouldn’t be impacted.

To further that point, there are currently 6.32 million Americans (excluding military) living outside the U.S. according to the Association of Americans Resident Overseas, hence fewer than 0.03% of Americans living abroad are on that list.

For further analysis, feel free to read IRS Customs Hold at Airports: Should I Worry? which further puts it into perspective.

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